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November 20, 2012

Investor Networks Urge Governments to Face Climate Change
    by Robert Kropp

With Hurricane Sandy behind us, and another international climate change conference coming up in Qatar, seven of the world's largest investor networks form the Global Investor Coalition on Climate Change and call for an investment-friendly approach to climate change.

SocialFunds.com -- Did Hurricane Sandy help force the response to climate change to a tipping point?

John Fullerton of the Capital Institute thinks it's possible. "Systems scientists know that Sandy and the historic drought that preceded it are mere symptoms of a systems design failure," he wrote recently. "That is, an economic system design failure, a system designed for a set of circumstances that applied in the past – huge planet, small economy, abundant resources, unlimited waste sinks – but are no longer relevant. The context has shifted."

"This time really is different," he continued.

Seven of the world's largest investor networks—the European Institutional Investors Group on Climate Change (IIGCC), the North American Investor Network on Climate Risk (INCR), the Australia/New Zealand Investor Group on Climate Change (IGCC), the Asia Investor Group on Climate Change (AIGCC) and the United Nations Environment Programme Finance Initiative (UNEP FI)—agree with Fullerton. "The re-election of President Obama in the United States, the leadership transition in China and the upcoming gathering of policy makers in Doha for the UN climate change conference provide an opportunity for investors and governments to begin a new dialogue on climate change and to advance the ambitious policies necessary to substantially reduce emissions and mitigate their potential impact on the world," they stated.

But in a letter to the governments of the world's largest economies, the investor networks warn, "Current policies are insufficient to avert serious and dangerous impacts from climate change. Further delay in implementing adequately ambitious climate and clean energy policy will increase investment risk for institutional investors and jeopardize the investments and retirement savings of millions of citizens."

Announcing the formation of the Global Investor Coalition on Climate Change (GIC) to help support the interests of investors, the networks laid out the steps necessary for governments to respond to climate change in a meaningful way. In addition to coming to a binding international agreement—the upcoming Doha Climate Change Conference should provide insight into the resolve of governments on the issue—the investors call for policies that support low-carbon investment and an end to subsidizing fossil fuel industries.

In advance of the international climate change conference held in Copenhagen in 2009, the United Nations' Principles for Responsible Investment (PRI) observed, "At least 80% to 85% of the finance and capital required in our collective response to the mitigation and adaptation needs of climate change will come from private investment sources and capital markets."

In order that climate change and clean energy policies be designed to attract investment, the investor networks recommend that governments consider the following measures:
• Include clear short term (2015), medium term (2020–2025) and long-term (2030–2050) greenhouse gas emission reduction objectives and targets, and comprehensive, enforceable legal mechanisms and timelines for delivering on these objectives and targets;
• provide incentives to shift the risk reward balance in favor of low carbon investment;
• encourage large-scale investments in low-carbon solutions, recognizing that scale is critical to making low-carbon investment opportunities more cost-effective than high-carbon opportunities;
• align policies with investment life-cycles, which can be as long as a decade or more;
• harness the power of markets to find the least costly ways to reduce emissions; and
• align climate change policies with wider policy goals including economic, energy, resources and transport policy objectives.

"While we commend governments that have implemented supportive policy, much further work is needed to decarbonize economies and portfolios and to stimulate private investment in low-carbon solutions," the letter concluded. "We urge the world’s largest economies to enter into a new dialogue with investors…and hasten the transition to a low-carbon economy."

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