Finance sector

Supporting low-carbon investments

Financial institutions and investors have a critical role in driving the world towards a low-carbon economy.

WWF is working with financial institutions to develop more appropriate financing packages for renewable energy projects and technologies. Already financial institutions have implemented strategies to switch their investments to a much lower carbon intensity portfolio, and have begun to review how companies plan for the impacts of climate policy on their core business.

What is the benefit for investors?

From an investor's perspective, the question of how prepared companies are for the shift to a world in which carbon emissions become costly is crucial. Companies that do not take these new policies into account are more likely to make erroneous decisions and reduce returns to investors.

Investing in a new coal power station, for example, would assume that penalties for carbon dioxide (CO₂) emissions will stay low and that other, less carbon-intensive fuels (e.g. gas, renewables) will not become profitable alternatives. However, climate policy is now increasing the cost burden of CO₂ emissions and, hence, the cost of fossil fuel-based power generation.

Investors therefore need to be aware of how the companies in which they invest are facing up to this new challenge, and engage with them to ensure that they are making sufficient allowance for the cost of carbon.

Allianz is leading the way

Allianz, a large international financial services provider, is addressing climate change risk at board level. Together with WWF, the Group is in the process of looking closely at carbon risks in banking, asset management, and insurance.

• Report: Climate Change and Insurance: An Agenda for Action in the United States

WWF and Allianz presented a ground-breaking report in June 2005 – Climate Change & the Financial Sector: An Agenda for Action. The report outlines specific steps for actions to better integrate risks from climate change into the insurance, banking, and asset management sectors.
Allianz marked the publication of the report in June 2005 with a pledge to increase investments in renewable energies by 300 to 500 million euros over the next 5 years.
 
"Climate change creates significant costs for the financial industry,” said Dr Joachim Faber, Allianz AG Board Member and CEO of Allianz's asset management arm, Allianz Global Investors. "In the interest of our clients and shareholders we are obliged to take these risks into account when making decisions on insurance underwriting, investments, or lending credit.”

• Report: Climate Change & the Financial Sector: An Agenda for Action
  

WWF and Allianz want to cooperate further to develop new tools for climate risk assessment, and show how leading financial companies can help manage the transition to a clean energy economy.




Electricity companies face financial risk from climate change

A WWF report "Power Switch: Impacts of Climate Policy on the Power Sector" - commissioned from international financial analysts Innovest and published in December 2003 - analyses the financial risks and opportunities that 14 major international electric utilities face from upcoming global and national climate policies.