Aviva Investors raises climate risk concerns with finance ministers

Aviva Investors has written to finance ministers and heads of central banks in 21 countries from the UK to Brazil urging them to address climate risks over concerns that efforts to tackle global warming could hit sovereign debt.

The £366bn asset manager has previously warned public companies over inaction on global warming, but the letter to finance ministers and central bankers is the first time it has written to sovereign issuers, reflecting “the importance of their role in global efforts to address climate change”.

Aviva called on the recipients to take several steps, such as setting out ambitious so-called nationally determined contributions, the actions each country will have to take to reduce national emissions and adapt to the effects of climate change.

Thomas Dillon, environmental, social and governance macro analyst at Aviva Investors, said it should not just be environmental ministers and their departments driving discussions on climate change, arguing the financial risks were very real for countries and the investors in their debt too.

“Finance ministers and central banks . . . have a fundamental role to play in a transition to a low-carbon economy,” he said.

In its letter, Aviva — which has £150bn invested in sovereign bonds across developed and emerging markets — warned that any delay on addressing climate risk “could prove catastrophic”.

“We want to voice our support for action on the commitments set out in the Paris Agreement and gather insight on progress to inform our investment decisions,” the London-based group said.

“We believe mitigation of, and adaptation to, climate change is essential for the safeguarding of our investments.”

Aviva’s intervention came as investors across the world have become concerned that inaction on climate change could have a huge impact on financial returns, although much of the focus has so far been on public equities and corporate bonds. BlackRock boss Larry Fink has warned that climate risk is a financial risk.

Rishi Sunak, Janet Yellen and representatives of Canada, Mexico and Brazil were among the recipients of Aviva’s letter.

Each letter was tailored for individual countries. Aviva also asked some politicians to join the Coalition of Finance Ministers for Climate Action, a group launched in 2019 that brings together fiscal and economic policymakers from more than 50 countries.

Others were urged to support the International Platform on Climate Finance, a proposed initiative aimed at helping governments and central banks ensure the finance required to deliver the Paris Agreement goals is raised.

Liam Spillane, head of emerging market debt at Aviva Investors, said that the reception to the letter had been good. “We recognise that some issuers may be less receptive than others, but we are viewing it through a long-term engagement approach,” he said.

Earlier this year, Aviva warned it would sell out of oil, gas, utilities and mining companies that failed to tack sufficient action to tackle global warming.