Institutional investors with more than $24trn (€18.5trn) in assets – including APG, PensionDanmark, the UK’s BT Pension Scheme (BTPS), the Universities Superannuation Scheme (USS) and Sweden’s AP funds – have argued that delays in implementing a global climate policy are increasing the risk profile of their investments.

In an open letter ahead of the UN Climate Summit in New York next week, more than 340 institutions – including 34 pension investors from Europe – urged governments to aid the deployment of low-carbon technologies and strengthen the regulatory support for the energy-efficiency and renewable-energy markets.

It argued national governments should offer up an “ambitious” policy response to combat climate change and said the signatories were concerned “gaps, weaknesses and delays” in climate change and clean-energy policies would increase the risk to their current investments, while also necessitating more radical action at a later date.

It insisted governments needed to consider the “unintended consequences” of financial regulation on low-carbon investment, and called on governments to phase out fossil fuel subsidies.

Jointly organised by the UN Environment Programme’s (UNEP) finance initiative, the Principles for Responsible Investment (PRI), the Institutional Investor Group on Climate Change (IIGCC) and its counterparts in North America, Australia and Asia, the letter estimated that clean-energy investments currently stood at $250bn a year but needed to increase to $1trn annually to prevent a 2 degree Celsius increase.

“Stronger political leadership and more ambitious policies are needed for us to scale up our investments,” the signatories argued.

UNEP executive director Achim Steiner said the perception prevailed that there was a choice between economic well-being or climate stability.

“The truth is,” he said, “we need both.”

Signatories’ proposals to governments:

  • Provide stable, reliable and economically meaningful carbon pricing that helps redirect investment commensurate with the scale of the climate change challenge
  • Strengthen regulatory support for energy efficiency and renewable energy, where this is needed to facilitate deployment
  • Support innovation in and deployment of low-carbon technologies, including financing clean-energy research and development
  • Develop plans to phase out subsidies for fossil fuels
  • Ensure national adaptation strategies are structured to deliver investment
  • Consider the effect of unintended constraints from financial regulations on investments in low-carbon technologies and climate resilience

The letter called for an “ambitious” global agreement to be put in place by the end of 2015 – the date of the Paris climate conference.

“This,” the signatories added, “would give investors the confidence to support and accelerate the investments in low-carbon technologies, in energy efficiency and in climate change adaptation.

“Ultimately, to deliver real changes in investment flows, international policy commitments need to be implemented into national laws and regulations.

“These policies must provide appropriate incentives to invest, be of adequate duration to improve certainty to investors in long-term infrastructure investments and avoid retroactive impact on existing investments.”

Alongside the letter, the investor groups also published a report detailing investors’ current activity in climate-sensitive investments – and cited AP4’s low-carbon equity portfolio.

Additionally, it highlighted a fund set up for BTPS by Legal & General Investment Management, which adjusted the weighting of FTSE 350 companies within the index according to their carbon footprint.

The report also praised green real estate and the advantages offered over what it deemed “conventional” buildings, such as lower energy consumption and operating costs.

In a move that is likely to be controversial, the call for “reliable and economically meaningful carbon pricing” was backed by several Australian investors, weeks after the domestic government abolished its emissions trading scheme (ETS).

However, an ETS remains in place within the European Union, with China currently considering one.

European pension signatories (34):

Denmark (3): PensionDanmark, PKA, Unipension

France (2): ERAFP, Fonds de Réserve pour les Retraites

Netherlands (7): ABP, APG, bpfBOUW, Mn, PMT, Woningscorporaties, Vervoer

Norway (1): KLP

Spain (1): Pensions Caixa 30

Sweden (6): AP1-4, AP7, Folksam         

Switzerland (1): Ethos Foundation

UK (13): BBC Pension Fund, Bedfordshire Pension Fund, BT Pension Scheme, Church of England Pension Fund, Greater Manchester Pension Fund, Kent County Council Superannuation Fund, Merseyside Pension Fund, Northern Ireland Local Government Officers’ Superannuation Committee, RPMI Railpen, South Yorkshire Pensions Authority, Environment Agency Pension Fund, Universities Superannuation Scheme, West Midlands Pension Fund