Guest blog: by Steve Waygood AVIVA Investors on Climate Change Agreement and Climate Finance

Steve Waygood
Chief Responsible Investment Officer, Aviva Investors 

UN Secretary General Ban Ki-moon borrowed an aphorism attributed to Voltaire when he addressed the closing plenary of COP21:

"We must not let the quest for perfection be the enemy of the public good." 

He was thanking negotiators for the compromises that they had made in the pursuit of the Paris Agreement on climate change. Ban Ki-moon’s statement could equally apply to any analysis of the agreement itself.

The deal marks an extraordinary moment in global history. Left unchecked, climate change would be the greatest market failure of all time, the greatest inequality of all time, and it would represent a social catastrophe. Instead, the unprecedented international accord now has the potential to be a game changer in the fight against climate change.

As an insurance company, Aviva is very positive about the newly calibrated political ambition to pursue efforts to limit climate change to 1.5 degrees above pre-industrial levels. More than 4 degrees would mean insurers wouldn’t be able to cover the risk. The Agreement provides us with hope that many of the extreme weather related catastrophes that are associated with a changing climate will not come to pass.

The consequences of rising temperatures would be similarly catastrophic for global markets - Aviva sponsored research published earlier this year attributed the value at risk of unchecked climate change – roughly speaking the value of global assets – to be up to $13.8 trillion for investors and $43 trillion for governments if temperatures rise by 6 degrees. As an investor, Aviva supports the specific commitment to

"Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate- resilient development."

But this welcome new focus on climate finance is almost completely restricted to the tens of billions of financial flows of aid from developed to developing countries. Shouldn't climate finance as a concept also cover the roughly $300 trillion in the global capital markets? After all, this is the capital that finances companies conducting renewable energy innovation, and energy efficiency
technologies. It also finances fossil fuel exploration and production. This is where the real influence exists. There is not much within the Paris Agreement that, by itself, will move money out of the latter and into the former. It is particularly disappointing that there is no mention of a carbon price, carbon tax, removing fossil fuel subsidies, or extending emissions trading. This is the stuff that really moves markets. This is left to member states to deliver at the national level.

But the level of ambition enshrined in the Paris Agreement does mean that member states now have to implement measures that lead us all to burn significantly less than a third of the known fossil fuel reserves. Once the market sees effective measures taken at the national level to deliver on this level of ambition, then we will see capital move at the scale we need. Judging by the significantly increased flow of relevant research from credit rating agencies and sell side brokers, analysts are watching government action here more closely than ever. Post Paris, market sentiment is poised to respond positively.

It would also be a gross error to judge the success of Paris on the text of the agreement alone. COP21 provided a platform for thousands of new commitments from countries, companies, investors and civil society.

For example, we have well over 170 intended national determined contributions, where member states have outlined the greenhouse gas emission reduction plans.

There was also very welcome news from the Financial Stability Taskforce, which unveiled an industry-led disclosure task force on climate related risks in order to develop voluntary and consistent climate relates disclosures “of the sort that would be useful to lenders, insurers, investors and other stakeholders in understanding material risks”.

The OECD also unveiled plans to consider whether a new guideline for investors in relation to their fiduciary duties and climate change was necessary, which Aviva would warmly welcome.

And, rather spectacularly, China announced plans to set up an effective emissions trading scheme that will cover their top ten thousand companies.

Without Paris, we wouldn't have these commitments. The world has acted in a strong and coordinated manner to address climate change, mapping out the way forward. The accord doesn't correct the market failure of climate change and it’s clear that the deal now requires serious work on its implementation. But the Paris Agreement does represent a significant step forward and with the right implementation, it will be the game changer that we need.


  1. Insurance for climate change damage is a fraud that attempts to profit from peoples hardship. Ask someone from Vanuatu. When PAM hit the island it suffered more than 400 million USD in damage. It was insured. How much did the insurers pay? Accord to a senior SwissRe representative addressing an UNCTAD meeting on reinsuring for climate damage, about 1.5 million USD. The insurer's response was, of course, the island nation was under-insured. A Bangladeshi minister then asked how poor nations, those most effected by climate change, can pay higher premiums. In effect he was asking to whom the insurance companies wanted the government to deny food, education or health they could pay higher insurance premiums.

    Even more ridiculous is the claim that the Paris Agreement put us on a good path to keep temperatures under 1.5C or does he really mean 4C...which he seems to believe is just beyond the safe limit when it is in fact so far beyond that hardly any place on earth would be spared from significant damage. In fact, sone of the most vulnerable countries are already on a path to suffer more than 4C temperature rises regardless of what politicians or insurance salesmen claim or wish. The IPCC scientists and leadibg climate scientists like James Hansen and about a dozen of his colleagues told us what we had to do, that we did not decide to do it at COP21, and what the consequences will be, which among others are 4C plus mean temperature rises above pre-industrial temperatures in some of the most vulnerable parts of the world.

    If you want the truth about COP21 read what women and youth who were there had to say to Fabius after the Paris Agreement was rushed through after secret negotiations & why we are in deep trouble:…

  2. Video link should be:
    For some unknown reason YouTube blocked other link.

  3. NGO: A.D.E.T need financial support to go ahead on climate actions.

  4. The political narrative on climate and economics does naturally deviate from the scientific narrative, because the political narrative seeks to retain 'power structures' within the existing economic system. An effective policy solution to strong climate change would help bridge the cognitive dissonance of the two narratives.

    We have such a proposal - it is called Global 4C.

    I ask anybody reading this, to please consider offering some support:

    Thanks, Delton Chen


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