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Investors Worth $20 Trillion Urge Legally-Binding Climate Treaty

The Tipping Point: Sustained stability in the next economy

WASHINGTON, DC - Hundreds of the world's largest investors, representing more than $20 trillion in assets, earlier this week encouraged governments and international policy makers to take new legally-enforceable steps to combat climate change at the upcoming UN climate summit in Durban, South Africa.

The group of 285 investors issued a joint statement emphasizing the urgent need for policy action which stimulates private sector investment in climate change solutions, creates jobs, and ensures the long-term sustainability and stability of the world economic system.

The statement represents the largest group, by both number of signatories and assets under management, ever to call for policy action on climate change. Signatories to the statement include financial institutions, state treasurers, controllers, pension fund leaders, asset managers, insurance groups, faith groups and foundations worldwide.

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.

The statement coincides with the start of the UNEP FI two-day, high-level summit - the United Nations Environment Programme Finance Initiative's Global Roundtable taking place in Washington, DC. The summit's theme is "The Tipping Point: Sustained stability in the next economy."

Here, an assembly of CEOs, decision makers and former heads of government are expected to call for profound reform of the global financial system.

Paul Clements Hunt, head of UNEP FI said, "The type of smart finance we are calling for, one that clears the way for the low-carbon economy's vast business opportunities, could prompt the reversal of the current climate of economic insecurity. It holds the potential to act as a major driver of growth and job creation."

Current levels of investments in low-carbon technology and infrastructure are substantially lower than the $500 billion per year thought necessary by the International Energy Agency to hold the increase of global average temperatures below two degrees Celsius - the target agreed in Cancun last year.

The statement is co-ordinated by three investor groups on climate change - the U.S-based Investor Network on Climate Risk, the European Institutional Investors Group on Climate Change and the Investors Group on Climate Change in Australia and New Zealand - alongside UNEP FI and the Advisory Council of the Principles for Responsible Investment.

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."

Investors sent the statement and report to the G20 and other governments ahead of the UN Framework Convention on Climate Change at Durban, South Africa in November/December.

Investors will engage with policy makers in Durban and call for domestic and international policy action including:

  • The definition by governments of clear short-term, medium-term 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.

  • Continued work towards a legally-binding international climate change treaty that includes all major emitters and sets short-term, mid-term, and long-term greenhouse gas emission reduction targets.

  • Support the development of the Green Climate Fund and other comparable funding mechanisms to assist developing countries to mitigate and adapt to climate change.

  • Accelerate efforts to reduce emissions from deforestation and forest degradation (REDD and REDD+).

Stephanie Pfeifer, executive director at the European Institutional Investors Group on Climate Change 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," said Pfeifer.

The investors' statement is supported by the findings of a report commissioned by the three investor groups and UNEP FI.

This report underscores the importance of investment-grade policy which will enable institutional investors to allocate capital towards climate change solutions, including government incentives to compensate for heightened risk and sufficient scale of technology deployment.

The report emphasizes that long-term policy stability is critical and retroactive changes can damage investor confidence.

Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change said, "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."

"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," said Figueres.

Frank Pegan, who chairs 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."

Click here to view the 2011 Global Investor Statement on Climate Change and a list of signatories.

Dr. Wolfgang Engshuber, who chairs the Advisory Council of the Principles for Responsible Investment, said, "Climate change will transform economies throughout the world, creating new opportunities for investors. However, these will gain traction only if governments play their part in laying down well-designed and effective climate change policies. Without such a supportive regulatory environment, we will not see the level of investment that is needed to transform the world's energy supplies and transport systems."

He observed, "Investors will look for an outcome from Durban that goes a long way to provide them with the certainty they seek that concerned governments will indeed create and sustain such an environment."

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