Empowering retail investors to steer the climate change debate
There is an urgent need to align investments with the goals of the Paris Agreement. Until now, approaches to addressing this need have overlooked a powerful decision-maker – retail investors (ordinary citizen investors). Approximately EUR 1 trillion of the assets of European retail investors are financing fossil fuels, despite 70 pct. of them wanting sustainability, and in particular climate-related, criteria to be reflected in their investment portfolios (Natixis Global AM Study 2017). However, few climate-friendly retail investment options exist at the moment. The project aims to ensure that retail investors can invest in line with their beliefs. Mobilising just 1 pct. of retail investors could potentially redirect EUR 5 billion to cleaner energy.
2˚ii is partnering with the WWF European Policy Office (WWF EPO), a fellow member of the EU’s High-Level Expert Group on Sustainable Finance, to run a targeted advocacy campaign to ensure that financial advisers are obliged to advise on sustainable investment products, investors can effectively invest in fossil-free funds and that investors are aware of the climate impact of their investments. This will also encourage the development of more investment options that are compatible with a 2˚C future.
The 2° Investing Initiative (2°ii) was set up in 2012 with the mission to align financial markets with climate goals. It has since become a pioneering think tank – with offices in Berlin, Paris, London and New York – on the integration of long-term risks and policy objectives into financial markets and regulatory frameworks. As part of its cutting-edge work, 2°ii co-initiated the first climate-related financial regulation in Europe – Article 173 of France’s Energy Transition law – which made climate change-related reporting for asset owners and asset managers mandatory. It also co-started the Swiss initiative on reporting against the Paris Agreement – involving the majority of Swiss pension funds and insurance companies – and launched the first international climate disclosure awards with the French Environment Ministry and Treasury.
WWF EPO has more than 20 years’ experience in EU policy work and engagement with EU institutions. The EPO sits within WWF’s extensive international network that works on climate change and environmental degradation issues. The WWF EPO Finance Practice programme is tasked with the mission of ensuring a coordinated, systematic approach to aligning investment portfolios with the Paris Agreement.
Through this project, 2˚ii and WWF EPO aim to:
- Enable retail investors to invest in line with their preferences by integrating sustainability requirements into EU financial legislation;
- Ensure climate transparency for investment products to make retail investors aware of the impact of their investments;
- Facilitate a rapid rise in the number of Paris-compatible investment options for retail investors.