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Ceres Translates Climate Ambitions Into Reality  

February 24, 2016

The climate deal agreed on by 196 countries at COP21 in Paris this past December is extraordinary in its ambitions—a 1.5° C limit on warming, and net zero emissions in the second half of this century.

Now comes the hard work of realizing those ambitions. Skoll awardee Ceres is right in the middle of this struggle—much as it has been for more than 25 years—mobilizing its network of investors, companies, and public interest groups to fight for a sustainable global economy.

The International Energy Agency estimates that achieving the Paris targets will cost the energy industry $16.5 trillion by 2030. That staggering sum cannot be paid by governments alone—it requires massive private-sector investment in our low-carbon future, combined with shifting existing investment away from risky high-carbon sectors.

First investor summit on climate risk

To this end, Ceres joined forces with the United Nations Foundation to bring together governments and investors for the first major event focused on the implications of the Paris agreement: the 2016 Investor Summit on Climate Risk, held at the UN in New York City last month.

UN Secretary-General Ban Ki-moon, former Vice President Al Gore, former New York City Mayor Michael Bloomberg, and UN Climate Chief Christina Figueres spoke alongside representatives of leading investors like French insurer AXA, BlackRock, and a number of big US pension funds. About 500 investors listened as Ban Ki-moon challenged them “to double—at a minimum—their clean energy investments by 2020.”

It was a busy week. Ceres held dozens of meetings to mobilize investors to spur bold action. This included convening 130 members of their investor network to work on agendas for moving companies, policymakers, and market actors; as well as a chief investment officer roundtable on clean energy investing.

They also brought together a group of financial industry actors—in partnership with Oxford University’s Smith School of Enterprise and Environment—to ramp up Ceres’ campaign to permanently stop the oil industry from sinking hundreds of billions of dollars into developing new oil reserves that are at risk of becoming stranded assets.

Big movement in the insurance sector

An important breakthrough came during a breakout session at the summit, when California Insurance Commissioner Dave Jones agreed to work on lowering regulatory barriers that currently prevent US insurers from investing more of their $6 trillion in assets into clean energy.

A major insurer pointed out that regulations needlessly prevent insurers from investing in clean energy, because they treat these investments as riskier than the market does as a whole. The Commissioner agreed on the spot to meet with the relevant national regulatory body to lower this barrier.

This followed his public call, two days before the summit, for insurers to divest from coal and disclose their other high-carbon assets. “The movement away from coal and the rest of the carbon economy poses a potential financial risk to insurance companies,” Jones said in a statement. “The potential risk of continuing such investments is that they lose value over time or that they lose value quickly.”

This is the first time a state insurance regulator has issued a call for divestment. The insurance marketplace he oversees is the sixth-largest in the world; if California insurers start shifting their investments, it could have a meaningful impact.

Richard Fahey, Skoll Foundation

Ceres has helped the Skoll Foundation embrace and act on its responsibilities to society as an institutional investor. We’ve signed on to several of Ceres’ coordinated efforts, including their 2014 call for fossil fuel companies to address how climate change will impact their business performance and strategies. Ceres shows us how asset owners, such as foundations, can move capital markets to accelerate the drive toward sustainability.

Web tool gives easy access to SEC carbon risk disclosures

Ceres stresses the high risks that investors face in remaining exposed to carbon, as the world commits irreversibly to a low-carbon economy. Smart investors want to avoid exposure to high-carbon assets that are at risk of becoming stranded in the near future, and invest instead in companies that are well-positioned to compete and succeed in the low-carbon economy.

In January Ceres launched a new service that finally gives investors access to definitive information on carbon risk—a web tool for accessing carbon asset risk disclosures in company filings with the US Securities Exchange Commission.

This kind of carbon footprint analysis by investors can reveal astonishing insights. It allowed CalPERS, the United States’ largest public pension fund, to figure out that half its carbon footprint was accounted for by only 80 of the 10,000 companies in its portfolio, suddenly making the job of reducing carbon exposure a bit more manageable.

Focusing on big opportunities

But above all, Ceres’ strategy focuses on the enormous, unprecedented opportunities that investors have to profit from the low-carbon transition—for example, the $12.1 trillion opportunity to invest in new renewable electric power infrastructure over the next two and a half decades. A recent publication by Ceres and Bloomberg New Energy Finance called “Mapping the Gap: The Road from Paris — Finance Paths for a 2-Degree Future” identifies the kinds of renewable energy investments that are likely to grow in the coming years.

The US Environmental Protection Agency’s Clean Power Plan is a powerful tool to promote these essential investments. After the Supreme Court suspended the Plan on February 9 in order to allow a lower court to rule on a lawsuit against it, Ceres reacted rapidly, mobilizing a massive response from companies and investors in their network. Getting the Plan back on track is now the next big challenge in keeping the world moving forward towards those ambitious Paris targets.

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