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Institutional Investors Managing $24T Call for Carbon Pricing, Ambitious Global Climate Deal

Nearly 350 global institutional investors representing over $24 trillion in assets have called on government leaders to provide stable, reliable and economically meaningful carbon pricing that helps redirect investment commensurate with the scale of the climate change challenge, as well as develop plans to phase out subsidies for fossil fuels.

"Gaps, weaknesses and delays in climate change and clean energy policies will increase the risks to our investments as a result of the physical impacts of climate change, and will increase the likelihood that more radical policy measures will be required to reduce greenhouse gas emissions," said the statement — the largest of its kind by global investors on climate change. "Stronger political leadership and more ambitious policies are needed in order for us to scale up our investments."

According to the International Energy Agency, the world must invest at least an additional $1 trillion per year — a Clean Trillion — into clean energy by 2050 if we have any hope of limiting global warming to 2 degrees Celsius and avoiding the worst impacts of climate change on our environment, health and the global economy. Yet global investment in clean energy has so far fallen far short of that, reaching just $254 billion in 2013.

The statement recognizes the role investors play in financing clean energy, outlines the specific steps they are committing to take, and calls on policymakers to take action that supports, rather than limits, investments in clean energy and climate solutions. It was coordinated by the four investor groups on climate change — Ceres’ Investor Network on Climate Risk (INCR) in the United States, the European Institutional Investors Group on Climate Change (IIGCC), the Investors Group on Climate Change (IGCC) in Australia and New Zealand, and the Asia Investor Group on Climate Change (AIGCC) — with the United Nations Environment Programme Finance Initiative (UNEP FI) and Principles for Responsible Investment (PRI).

“The perception prevails that we need to choose between economic well-being or climate stability. The truth is that we need both,” said Achim Steiner, UN Under-Secretary-General and Executive Director of the UN Environment Programme. “What is needed is an unprecedented re-channelling of investment from today´s economy into the low-carbon economy of tomorrow. Investors are owners of large segments of the global economy as well as custodians of citizens’ savings around the world. Having such a critical mass of them demand a transition to the low-carbon and green economy is exactly the signal Governments need in order to move to ambitious action quickly.”

“It is significant that the largest institutional investors from around the world are in agreement that unmitigated climate change puts their investments at risk,” said Mindy Lubber, director of INCR and president of the U.S.-based nonprofit sustainability advocacy group, Ceres. “The financial community has a message for heads of state gathering at the United Nations this week: We can’t afford to wait any longer for a climate deal.”

Alongside the statement, the investor groups have published a report detailing examples of action being taken by investors that support a low-carbon, climate-resilient economy. While ambitious policy is required in order for low-carbon investments to be brought to scale, these examples demonstrate that investors are already acting on climate change in a variety of ways. These activities include direct low-carbon investments, the creation of low carbon funds, company engagement, and reducing exposure to fossil fuel and carbon-intensive companies.

Examples in the report from both developed and developing countries include:

  • Danish pension fund PKA looking to increase its new and existing offshore wind farm investments to €1.5 billion by the end of 2015.
  • U.S. insurer and pension fund provider TIAA-CREFF reduces the carbon footprint of its real estate portfolio by 17 percent, cutting 58,000 metric tons of greenhouse gas emissions.
  • Swedish pension fund AP4 is committed to decarbonizing its entire $20 billion listed equities portfolio.
  • China Utility-Based Energy Efficiency Finance Program provides loans worth $790 million, financing 226 projects and reducing emissions by 19 million metric tons of carbon.
  • ASN Bank in the Netherlands to become fully carbon-neutral by 2030.
  • Zurich Insurance Group to invest up to $2 billion in green bonds, one of many commitments this year that has resulted in 20-fold growth in green bond market since 2012.
  • HSBC Armenia partners with IFC to finance nine small-medium size enterprise energy efficiency projects in Armenia, totaling approximately $25 million and reducing carbon emissions by more than 6,600 tons per year.
  • Global bank ING has in 7 years reduced its energy project loan allocation to coal power from 63 to 13% and increased its allocation to renewable energies from 5 to 39 percent.

In addition, the investor groups have launched a public online database of select low carbon investments made by asset owners such as pension funds and insurance companies. The Low Carbon Investment Registry identifies how institutional investors are directing capital towards low carbon assets. Asset owners around the world will be encouraged to add examples to the Registry leading up to the climate negotiations in Paris.

“The Low Carbon Investment Registry shows how investors are already supporting the transition to a low carbon economy by investing in a variety of different ways — directly into renewable energy projects, into clean energy funds, through green bonds and through the establishment of public-private-partnerships,” said Nathan Fabian, Chief Executive of IGCC. “It gives policymakers a better understanding of how private capital is currently flowing into low carbon investments.”

Several signatories to the Global Investor Statement on Climate Change are expected to announce significant new individual commitments related to climate risk and lowcarbon investment at the UN Summit on Climate Change on September 23.

Click here to download a recording of the press briefing on the statement.

While investors press governments to take definitive action on moving toward a low-carbon economy, organizations are taking it upon themselves to begin the transition: Tech companies such as Apple, Google, Facebook and SAP have all committed to run their data centers on 100 percent renewables; while Microsoft, which became carbon-neutral in 2012, last month cut ties with conservative public-policy group ALEC due to its anti-clean energy lobbying. Meanwhile, Project Liberty, the US’ first commercial-scale biofuel plant that will eventually produce more than 25 million gallons of fuel a year from corn waste, opened earlier this month; and the University of California last week announced it will allocate $1 billion over five years for direct investments in solutions to climate change, including securing substantial solar energy for the 10-campus system for the next 25 years, as part of UC President Janet Napolitano’s goal of bringing university operations to carbon neutrality by 2025.

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