Aviva Investors is calling on the key global players including the International Monetary Fund, World Bank and the Financial Stability Board to create a transition plan for private capital to stave off climate catastrophe.

In a white paper to be published ahead of the COP27 conference on 6 November, the asset manager claims the current international financial architecture requires urgent reform to tackle climate change — “the defining crisis of the next 80 years”.

Aviva Investors said global regulators and standard setters must convene at a Bretton Woods-style conference by 2024 to create a coordinated global transition plan and begin implementing reforms.

They must also lead by example, and create a 2050 transition plan for their own work, put climate at the centre of their organisation’s mandates, and report annually on the net-zero progress of firms under their supervision, the reports argues.

Failure to do so would result in “unprecedented environmental, social and economic consequences as the planet warms”, including “the potential collapse of the financial system before the end of the century”.

Mark Versey, chief executive officer at Aviva Investors, said: “The global economy and financial system are currently financing their own destruction because the global financial architecture is not fit for purpose.

“We need key institutions in the architecture to create their own global transition plans for finance and to add climate considerations to the heart of their agenda. This will accelerate delivery of the Paris Agreement and the United Nation’s Sustainable Development Goals.”

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Without a wide-scale regime change, private sector action to support the transition to net zero “will remain a second-tier priority,” said Steve Waygood, chief responsible investment officer at Aviva Investors and a co-author of the report.

Aviva Investors parent Aviva had $2.3bn invested in coal assets as at the end of November 2021, according to the Global Coal Exit List. However, it has vowed to exclude new coal mines and new coal plants, according to Reclaim Finance.

Private finance is the lynchpin in the fight to control global temperatures, which are on course to rise by 2.8°C by 2100, according to Aviva Investors’ report, noting banks, asset managers and other financial institutions hold an estimated $510tn in global assets.

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Although the financial services industry has committed to net-zero at scale, signing up to initiatives like the Glasgow Financial Alliance for Net Zero, too much money continues to fund activities that exacerbate climate change, Aviva Investors says.

“Financial market participants are hugely influenced by their regulatory regimes and respond to signals from their supervisors,” said Waygood. “A clear focus on managing and mitigating climate risk, and on delivering a global transition plan for finance, will ensure those signals incentivise and support financial institutions. It will in turn encourage them to allocate capital towards companies committed to the transition and mobilise finance in support of mitigation and adaptation in countries around the world, especially in developing economies.”

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