Wednesday, October 19, 2011

Global Investors Call For Meaningful Action On Climate Change

Oct 19: Despite the global economic crisis, and increased market volatility, the world's largest investors urged governments and international policy makers to take new and meaningful steps in the fight against climate change. In a joint statement, the group of 285 investors representing more than $20 trillion in assets stressed the urgent need for policy action which stimulates private sector investment into climate change solutions, creates jobs, and is essential for ensuring the long-term sustainability and stability of the world economic system.

    According to a release, investor support for climate action has more than doubled since November 2008, when 150 investors with $9 trillion in assets under management first came together to urge government leaders to act on climate change. Current levels of investments in low-carbon technology and infrastructure are substantially lower than the $500 billion per year deemed necessary by the International Energy Agency (IEA) to hold the increase of global average temperatures below 2 degrees Celsius -- the target agreed in Cancun last year.

    Coordinated by three leading investor groups on climate change -- the US-based Investor Network on Climate Risk (INCR); the European Institutional Investors Group on Climate Change (IIGCC); and the Investors Group on Climate Change (IGCC) in Australia and New Zealand -- alongside the United Nations Environment Programme Finance Initiative (UNEP FI), and the Advisory Council of the Principles for Responsible Investment (PRI), the statement represents the largest ever grouping, by both number of signatories and assets under management, to call for policy action on climate change.

    The statement concludes: "Investment-grade climate change and clean energy policy will provide substantial economic benefits. Those countries that succeed in attracting private capital into low-carbon growth areas such as cleaner and renewable energy, energy efficiency and decarbonization will enjoy multiple benefits, including new jobs, new businesses, new research and technology innovation, more resilient and secure energy systems and, ultimately, more sustainable economies. Private investment can and must play a critical role in addressing the risks and opportunities posed by climate change. However, private sector investment will only flow at the scale and pace necessary if it is supported by clear, credible and long-term domestic and international policy frameworks -- "investment-grade climate change and energy policies" -- that shift the balance in favor of low-carbon investment opportunities."

    The statement is supported by the findings of a report -- Investment-Grade Climate Change Policy: Financing The Transition To The Low-Carbon Economy -- commissioned by the three investor groups and UNEP FI. The report underscores the importance of "investment-grade policy" which will enable institutional investors to allocate capital towards climate change solutions, including appropriate government incentives to compensate for heightened risk and sufficient scale of technology deployment. The report also emphasizes that long-term policy stability is critical and retroactive changes can significantly damage investor confidence. Contained within the report are case studies on the climate policies of six major emitters and further examples of investment-grade policy, which may prove instructive for national governments and negotiators considering future policy initiatives.

    Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) commented saying, "Governments have clearly signaled their intention to move towards a low-carbon future. To get there fast enough will require huge new investments in clean energy. This is the only way to guarantee the long-term sustainability and security of the world economic system and the stability of returns from global investment, a major part of which is directly linked to the pensions and life insurance of ordinary people around the world. This global investor group has seen this clearly. The Statement from major private sector investors will help to give governments both the confidence and the knowledge to put the right incentives and mechanisms in place".

    The Investor groups sent the statement and report to the G-20 and other governments in anticipation of the United Nations Framework Convention on Climate Change meeting (COP17/CMP7) in Durban, South Africa November 28 to December 9, 2011 [See WIMS 10/11/11]. Investors will engage with policy makers there and call for domestic and international policy action including:

  • The definition by governments of clear short-, medium- and long-term greenhouse gas emission objectives and targets and comprehensive, enforceable legal mechanisms and timelines.
  • The creation of lasting financial incentives that shift the risk reward balance in favor of low-carbon assets.
  • The design of lasting and comprehensive policies that accelerate the deployment of energy efficiency, cleaner energy, renewable energy, green buildings, clean vehicles and fuels, among others.

    International policy recommendations include:

  • Continued work towards a binding international climate change treaty that includes all major emitters and sets short-, mid-, and long-term greenhouse gas emission reduction targets.
  • Support the development of the Green Climate Fund and other comparable funding mechanisms.
  • Accelerate efforts to reduce emissions from deforestation and forest degradation (REDD and REDD+).

    Stephanie Pfeifer, Executive Director at the IIGCC said, "Policy risk has a critical influence on investment in low-carbon growth areas such as renewable energy. Attracting capital at the scale required to meet climate change goals will only be possible when low carbon investments are seen as attractive relative to higher carbon investments. Determined leadership on national and international climate and energy policy will be fundamental in shifting this risk/return balance in favor of low carbon investments".

    Frank Pegan, Chair of IGCC Australia/New Zealand said, "Individual nations will be in a stronger position to attract private capital to stimulate their economies by implementing clear and credible climate policies. As and when governments around the world show leadership and reduce policy risk around climate change for investors, the investment flows will follow." Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk said, "The global economy is moving towards a low-carbon future. The governments that act aggressively to enact strong, long-term climate and energy policy will reap the rewards. They will drive the innovation, maintain competitiveness in the 21st century and attract investment."

    Access a release from the organizations (click here). Access the joint statement (click here). Access the 44-page report (click here). Access the UNFCCC website for more information and details on the upcoming COP17/CMP7 meeting (click here). [#Climate]