Huge Investor Alliance Presses Global Acceleration of Paris Accords

The largest group of worldwide investors wants governments to quicken progress in battling climate change ahead of this week’s United Nations conference in Poland.

The 415-member Investor Agenda, which collectively manages more than $32 trillion in assets, has signed the 2018 Global Investor Statement to Governments on Climate Change, which urges world governments to commit to a greener earth in line with the Paris Agreement’s mission.

The agreement, which President Donald Trump withdrew the US from last summer, aims to significantly reduce its pollutants to bring the climate temperature to “well below” 2°C above preindustrial levels, eventually capping the maximum point at 1.5°C above that level.

The group is proposing the accelerations because it is concerned the deal is already falling short of its goal. Investor Agenda has dubbed this the “ambition gap.”

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The coalition said the full implementation of current nationally determined contributions would bring “an unacceptably high temperature increase that would cause substantial negative economic impacts.”

“This ambition gap is of great concern to investors and needs to be addressed, with urgency,” the statement reads. “It is vital for our long-term planning and asset allocation decisions that governments work closely with investors to incorporate Paris-aligned climate scenarios into their policy frameworks and energy transition pathways.”

Additionally, the investors want companies to better report their climate-related financial information in order to price such risks and opportunities more effectively.

“That is why we welcome the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosure (TCFD) and are taking practical steps to assist their implementation around the world,” wrote Investor Agenda.

Alongside the phasing out of coal and achieving the Paris Agreement’s goals, the group specifically wants policymakers to clamp down on the private sector, which is slower to adopt environmental, social, and government (ESG) investing strategies than their public counterparts. This is due to their shareholder obligations to enhance profits, among other things.

“Despite the misguided policies of the Trump Administration, global efforts to address the very real threat climate risk presents to the economy, financial markets, and investment returns are ongoing,” said New York State Comptroller Thomas P. DiNapoli, who oversees the $207 billion New York State Common Retirement Fund. “The transition to a low-carbon economy presents numerous opportunities to create value, and investors who ignore the changing world do so at their own peril.”

Peter Damgaard Jensen, chair of the Institutional Investors Group on Climate Change and CEO of Denmark’s PKA ($41 billion), pushed for coal’s elimination from portfolios in the “clean energy future.”

“Investors, including PKA, are moving out of coal in their droves given its devastating effects on the climate and public health, compounded by its poor financial performance,” Jensen said.

Tags: Climate Change, ESG, Investor Agenda, UN

Chinese start-ups have attracted more venture capital funding than their US counterparts for the first time, according to a report from information and data provider Preqin and graduate business school INSEAD.

The report said that in the first half of 2018, $56 billion was invested in China-based early-stage companies, compared to $42 billion in the US during the same period.

“China’s emergence as a hub of innovation and entrepreneurship has been the major venture capital narrative of the past five years,” Christopher Elvin, Preqin’s head of private equity, said in a release.

Elvin said conditions in China are suited to promote large technology firms because the country has more mobile phone users than any other, and ecommerce and mobile payment technology is already deeply embedded in their lives.

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“With several unprecedentedly large funds in market to raise capital for investment in the sector,” Elvin added, “the prospects are bright for further developments in the China-based startup market.”

The report described the recent growth in China’s venture capital market as “meteoric,” as it has grown more than 12-fold in just the first half of the year from $4.6 billion for all of 2010. It also said that although the US is still the biggest venture capital market in the world, five of the 10 largest “unicorns” are based in China, which the report calls “red unicorns.”

This includes Ant Financial Services Group, which is currently valued at $150 billion. The report defines venture capital unicorns as privately held, venture capital-backed companies with valuations of $1 billion or more. It also noted that China-based companies account for three of the five largest IPOs of venture capital unicorns, including the largest – Alibaba Group, which had a value of $231 billion when it held its IPO in 2014.

“Looking at the growth of the Chinese VC market over the past several years, it looks promising that China could become the market-leader of VC in the world,” said the report. “Data suggests that both the money flowing into early-stage companies as well as the money flowing back to investors is currently on the rise, indicating the development of a full investment cycle empirically.”

However, the report said that because VC market in China is still very young it is too early to conclude whether its current growth is sustainable or not. “China is also well known to forge its own path,” the report said, “making it difficult to compare to the historical development of Western markets.”

Tags: China, Preqin, Venture Capital