WEDO, along with 186 groups, endorses Friends of the Earth’s letter to Green Climate Fund (GCF) Board, on the topic of developing and adopting a fossil fuel-free, ethical investment policy for its own assets. Read the full letter below:
March 16, 2017
Dear Members and Alternate Members of the Board:
We write to urge you to develop and adopt an investment policy for the treasury of the United Nations Green Climate Fund that maintains its current fossil fuel-free status and is consistent with international best practice for environmental, social, and governance (ESG) standards. To that end, in approving a competitive process for the selection of the Permanent Trustee at its 16th meeting next month, the
Board should require that the Permanent Trustee be able to implement the GCF’s investment policy.
Ensuring that GCF assets do not cause climate change, do no harm, and contribute to the global public good is essential to the mandate of the GCF itself. The Review of the Interim Trustee presented at B.15 noted that the Fund should explore means to maintain a de-carbonized investment portfolio with income generated through green investments. Such an investment policy is equally necessary to ensure compliance with the Paris Agreement, specifically Article 2, which, among others, calls for “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” Further, in an age of climate crisis, exposure to investments in high-carbon, environmentally unsustainable sectors and practices poses systemic financial risk to the GCF, not to mention reputational and physical risk.
Increasingly, institutional investors are shifting their investments in recognition of these risks. As of December 2016, 688 institutions and nearly 60,000 individuals have committed to fossil fuel divestment, reaching an asset value conservatively estimated at USD $5 trillion. The largest sectors committing to divestment are pension funds and insurance companies (See here). This includes divestment from all fossil fuels by the city of Oslo and the divestment of $4 billion in commercial bank assets by Amalgamated Bank in the United States.
In addition, many investors are also investing in climate solutions, such as renewable energy and clean tech. For instance, the 155 foundations of DivestInvest Philanthropy have committed to divest from fossil fuels and invest in the clean energy economy. The GCF should be at the forefront of this increasingly mainstream paradigm shift in investment, rather than lagging behind it.
The GCF currently has the advantage of not having invested its assets in fossil fuels, so disentanglement from fossil fuel investment is not necessary. However, the Board must not only ensure that this fossil fuel-free status is maintained, it must go a step further. We therefore request that the Board’s decision at B. 16 on a competitive process for the selection of the Permanent Trustee:
Requires institutions that seek to become the Permanent Trustee to manage the investment of GCF financial assets according to the mandate of the GCF and Paris Agreement. To be considered, candidates must commit to implementing an ethical, fossil-free investment policy, and preferably be able to demonstrate socially and environmentally responsible asset management.
Requests the Secretariat to develop an investment policy, in consultation with civil society and other stakeholders, that prohibits investments in fossil fuels and is consistent with the UN Principles for Responsible Investment.
Find all signed groups here.