The statement was signed by 259 investors from North America, Europe, Asia, Australia, Latin America and Africa with collective assets totalling more than $15 trillion—more than one-quarter of global capitalisation. Signatories included Allianz, HSBC, APG and a dozen US public pension funds and state treasurers.
It is the largest-ever group of investors to call for government action on climate change and their statement sends out a clear message to climate negotiators ahead of the United Nations Climate Change Conference in Cancun (Mexico) and to the new US Congress to take action now in the fight against global warming or risk economic disruptions far more severe than the recent financial crisis.
Citing potential climate-related GDP losses of up to 20% by 2050 and the economic benefits of shifting to low-carbon and resource-efficient economies, the investors’ statement calls for national and international policies that will spur private investment into low-carbon technologies.
"Current investment levels fall well short of what is needed to stem the rise of global temperatures and adapt to a warming world,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk. “Strong government policies that reward clean technologies and discourage dirty technologies are essential for closing the climate investment gap and building a low-carbon global economy.”
Sharp message for new US Congress
"Climate change may be out of vogue in Washington today, but it poses serious financial risks that are not going away and will only increase the longer we delay enacting sensible policies to transition to a low-carbon economy," said Jack Ehnes, chief executive officer of the California State Teachers' Retirement System, the nation's second largest public pension fund with $141 billion (€103 billion) in assets. "The nation’s leaders should take the cue from California, where strong clean energy policies have spurred American innovation and created thousands of jobs."
This week’s statement comes in advance of key negotiations in Cancun, beginning 0n 29 November, to map out plans for a new international climate change treaty after the Kyoto Protocol expires in 2012. No major agreement is expected from these talks, in part because the US Congress has balked at enacting national climate legislation to reduce greenhouse gas emissions.
While low-carbon global investment is increasing, especially in Asia, investors say substantially more private capital would be available for renewable energy, energy efficiency and other low-carbon technologies, if stronger policies were in place. Global clean energy investments are expected to eclipse $200 billion (€146 billion) in 2010, up slightly from 2009 but substantially less than the roughly $500 billion (€366 billion) that Bloomberg New Energy Finance and the World Economic Forum says is needed per year by 2020 to restrict warming to below 2 degrees.
“A basic lesson to be learned from past experience in renewable energy is that, almost without exception, private sector investment has been driven by consistent and sustained government policy. Experiences from a number of countries around the world show how structured policies can bolster investor confidence, help ramp up renewable energy investments, bring technologies down the cost curve and thereby eventually strengthen their competitiveness.” said Ole Beier Sørensen, Chairman of the Institutional Investor Group on Climate Change and chief of Research and Strategy at the Danish pension fund ATP, with $76.5 billion (€56 billion) in assets.
Reflecting its weaker policies, North America lags well behind Europe and Asia in clean energy investing, supporting $20.7 billion (€15.1 billion) in renewable energy projects in 2009, in comparison to $43.7 billion (€32 billion) for Europe and $40.8 billion (€29.9 billion) for Asia, according to a recent report by the United Nations Environment Programme (UNEP).
Along with weaker investments, the US lags behind Europe and Asia in clean energy job creation. Just 176,000 of the world’s three million renewable energy jobs are in the US, while China boasts more than one million, according to the United Nations Environment Programme and The Renewables 2010 Global Status Report. China created 300,000 renewable energy jobs in 2009 alone.
Fast-start climate financing a priority
While no comprehensive agreement is expected in Cancun, investors are hoping for some forward movement during the international negotiations. Among the investors' key priorities is delivery of promised fast-start climate financing, consistent with pledges at last year's UN climate negotiations in Copenhagen. The US and other developed countries vowed at that time to channel up to $100 billion (€72 billion) a year of climate finance from multiple sources by 2020, including additional $30 billion (€22 billion) of "fast-start" funding from 2010 to 2012.
“This statement shows investors are serious about the risks posed by climate change and the importance our community places on action by government to reach a global agreement. Investors need greater policy certainty from governments,” said Donald MacDonald, trustee, BT Pension Scheme, and chair, Principles for Responsible Investment. “Deferring climate change agreement adds to investor concerns that climate change risks and costs are not taken seriously. The Cancun talks provide an opportunity for all concerned governments to take leadership on this important issue and start framing an agreement needed to create a sustainable investment environment.”
Ceres is a leading coalition of investors and environmental groups working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, an alliance of 90 institutional investors with collective assets totalling $9 trillion (€6.6 trillion).
The United Nations Climate Change Conference will be held in Cancun (Mexico) from 29 November to 10 December 2010.
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