By Jake Barnett, CIMA
   Director, Sustainable Investment Stewardship
 
   

In a year where headlines about the risks of climate change seem to be popping up daily, no story has commanded a greater immediate global response than last week’s release of the latest Intergovernmental Panel on Climate Change (IPCC) report.

The new report issued some stark warnings: human behavior has unequivocally caused higher temperatures, and scientists are now observing widespread, rapid and intensifying changes to the Earth's climate. United Nations Secretary-General António Guterres described the report as a "code red for humanity."

While these serious statements might be overwhelming to some, I believe it is important to stay informed—by digesting the report, we gain a better understanding of what collective steps must come next. To help with this effort, below are several responses to the "FAQs" emerging in response to the IPCC report.

What is the IPCC?

The IPCC is a governing body of the United Nations, composed of representatives from 195 countries, including the United States. This specific report is the result of research by more than 200 of the world's leading climate scientists. This group reviewed more than 14,000 papers to reach its findings, and the report considered approximately 78,000 comments from governments and climate experts throughout the review process .

What is new about this report?

The IPCC stated, in its most strident tone ever, that humans are not only changing the climate, but have already done so, with worrying ramifications. The report is more emphatic of its conclusions because of recent major advances in climate science. For example, the IPCC has made significant progress in the science of climate attribution, which explores how climate change plays a role in extreme weather events like heavy rainfall or heatwaves.

The report also provides new estimates on the likelihood that we can limit the global temperature increase to 1.5°C from pre-industrial levels. The IPCC said sustaining the same level of worldwide carbon emissions released in 2020 for just 11.5 more years would leave us with just a 50% chance of limiting warming to 1.5°C. In other words, warming will exceed 1.5°C if we do not rapidly cut emissions on a global scale.

Another major development in this report is its regional analysis. For the first time, the IPCC published more detailed breakdowns of how climate change will affect various geographic regions.

How does this affect my investments, and what is Wespath doing about it?

As the Earth’s climate changes, we can expect to see more intense wildfire seasons, more historic heatwaves and more frequent extreme storms, like Hurricanes Sandy and Katrina. Beyond U.S. borders, rising sea levels will threaten low-lying islands. Devastating flooding like that recently seen in Germany and China and destabilizing droughts like those recently observed in the Middle East and Sub-Saharan Africa, will become more frequent.

All these climate events have financial implications. Preparing and recovering from more extreme weather will consume meaningful financial resources. The physical impacts of climate change will alter property and land, causing uncertainties in our food system and reshaping countless commercial industries. Investors with globally diversified portfolios are exposed to these shifts through their investment holdings.

Wespath and its subsidiaries steward investment assets for both pension participants and institutional clients. As many readers will know, we believe achieving a sustainable global economy—which prioritizes long-term prosperity for all, social cohesion and environmental health—is necessary to achieve the investment return expectations of these stakeholders.

The pillar of environmental health is directly connected to climate considerations. A stable weather system, resilient ecosystems, healthy oceans and avoiding the negative consequences of unabated climate change are all essential to the long-term success of our global economy.

We support environmental health in a variety of ways. Here are a few examples:

• Our "Low-Carbon Transition" Investment Belief helps shape our overarching investment philosophy
• We joined other agencies of The United Methodist Church in committing to net-zero emissions across investments, operations, facilities and ministry by 2050
• We directly invest in low-carbon solutions and have designed investment strategies focused on companies best prepared for a lower-carbon future
• Through the Climate Action 100+, we lead engagements with oil and gas companies—including Chevron and Occidental Petroleum—urging them to align their businesses with climate best practices
• We participate in investor initiatives like the Net-Zero Asset Owner Alliance, which support the rapid decarbonization called for by the IPCC

Where can I learn more?

The IPCC published a helpful landing page for its report here. It includes links to the full report, a summary of the report, additional FAQs and other useful resources.

To learn more about Wespath's work to support environmental health and achieve a sustainable economy, I encourage you to check out our latest Sustainable Investment Report.