Institutional Investors Call Governments for Effective Carbon Pricing
Nearly 350 global institutional investors released a statement for government provision of stable, reliable, and economically meaningful carbon pricing just days before the Climate Summit at the United Nations headquarters in New York. The four investor groups on climate change – Ceres’ Investor Network on Climate Risk (INCR), the European Institutional Investor Group on Climate Change (IIGCC), the Investors Group on Climate Change (IGCC), and the Asia Investor Group on Climate Change (AIGCC) – were responsible for coordinating the Global Investor Statement on Climate Change, alongside the United Nations Environment Programme Finance Initiative (UNEP FI) and Principles for Responsible Investment (PRI).
The statement acknowledges the role that investors play in financing clean energy and outlines the steps they are committed to take; however, the group of global investors, collectively representing more than $24 trillion in assets, declare that stronger political leadership and policies are needed for them to scale up investments. In 2013, global investment in clean energy amounted to $254 billion, falling very much short of the $1 trillion a year investment necessary to limit the effects of global warming to 2 degrees Celsius, as estimated by the International Energy Agency (IEA).
The statement demands government turn climate-related policies into mainstream action. The international investor community has already begun addressing climate change issues; alongside the statement, the group of institutional investors also published both an online database and a report that describe how they have begun to act on climate change, including direct low carbon investments, the creation of low carbon funds, company engagement, and reduced exposure to fossil fuel and carbon-intensive companies. Specific examples included in the report include the following:
- A Swedish pension fund, AP4, has committed to decarbonising its entire equities portfolio
- The Zurich Insurance Group plans to invest up to $2 billion in green bonds; this is only one of the group’s many commitments that led to a 20-fold growth in the green bond market since 2012
- Global bank ING has reduced its energy project loan allocation to coal power from 63% to 13% in 7 years; it has also increased its allocation to renewable energies from 5% to 39%
- The China Utility-Based Energy Efficiency Finance Programme has provided loans worth $790 million to finance 226 projects, which has led to a reduction in emissions of 19 million metric tons of Carbon
The public online database – the Low Carbon Investment Registry – serves to encourage international asset owners to add examples to the Registry before the climate negotiations in Paris begin in 2015, which will provide policymakers a clearer understanding of how private capital is already flowing into low carbon investments.