Without aggressive funding in clean-energy and climate solutions, the world we know could perish

• What investors choose to fund will shape major transitions to clean energy and net-zero targets.
• Investors want more data to better assess climate-related risks and opportunities.
• Underwriting policies and advocacy can also help investors apply pressure to the fossil-fuel industry.

Investors and finance professionals know what they put their money in can often be influential on a global scale. A growing number of them are realizing how their funds can also help lead the global transition away from fossil fuels.

In a multipanel discussion at Climate Week NYC on Wednesday, several investors and finance professionals highlighted the industrywide work needed to prevent catastrophic conditions described in the latest report from the Intergovernmental Panel on Climate Change.

Investors and financiers determine which clean-energy companies and projects receive capital through where they choose to invest money and provide resources. They also evaluate and determine risk, known as underwriting. The divestment movement actively encourages financial-services companies to sell their fossil-fuel assets while bringing attention to how they fund and insure industries that produce most of the world's carbon emissions.

Divestment among investors slowed in 2020, with more investors seeking to collaborate with companies they own and other investment firms in implementing more sustainable operations and carbon-emissions targets. This includes organizations like the United Nation's Net-Zero Banking Alliance or the investor-led Climate Action 100+.

"It's not something that any one asset owner or asset manager or even corporation can do on their own. It's going to require a collective effort," said Michael Cappucci, managing director of compliance and sustainable investing at Harvard Management Company.

At the California Public Employees' Retirement System, the largest public state pension fund in the US also known as CalPERS, funding efforts to mitigate the climate crisis have become an especially urgent issue.

"As I see the smoke from the wildfires drifting across my garden, I know the people battling those fires are CalPERS members; they're firefighters, the first responders," said Anne Simpson, managing investment director for CalPERS' board governance and sustainability. "The question of risk isn't theoretical or far away. It's here, right now, as Fatboy Slim would say. And we need to be scaling our action in response."

Cappucci said a big challenge is the gap in data and methodologies needed for companies like Harvard Management to effectively neutralize its carbon emissions, also known as "net-zero." Cappucci's firm has actively reached out to other firms and organizations for assistance.

Simpson said markets need more information on climate-crisis risks, including the true price of carbon, total emissions, and fossil-fuel subsidies. Encouragingly, both the US Securities and Exchange Commission and the International Financial Reporting Standards Foundation - which sets the rules for accounting standards for public companies - are looking at the increasingly popular framework for climate-related financial information established by the Task Force on Climate-Related Financial Disclosures.

The UK-based insurance firm Aviva's plan to become net-zero by 2040 includes shifts in its operations, supply chain, asset ownership, as well as factoring in the sustainability commitments of its investments. Aviva has also pledged to stop selling insurance for companies making more than 5% of their revenue from thermal coal or unconventional fossil fuels by the end of this year. The insurer will also sell its assets from companies that make more than 5% of their revenue from coal by the end of 2022. "That's really trying to make that initial stand as explicit as possible," said Jason Storah, CEO of Aviva Canada. "We really want to work and engage with other companies." Coal and fossil-fuel companies can continue to be underwritten or owned by Aviva if they sign up for clearly tracked targets to lower their emissions.

Still, Simpson said investors need to do more than advocate energy efficiency and change from fossil-fuel suppliers and producers; their work extends to the companies and industries that consume them as well. "That means transformation of manufacturing, automakers, steel, cement, across agriculture, transport, utilities, the way we get around, the way we make things, the things we eat, the way we connect with each other."