The European Commission must prevent retroactive changes to EU member states’ renewable energy policies if it wishes its €315bn investment plan to succeed, a €10trn coalition of asset managers and pension funds has argued.
The Institutional Investors Group on Climate Change (IIGCC) also proposed that all projects funded by the European Fund for Strategic Investments (EFSI) comply with a “robust” set of sustainability criteria, with all high-carbon projects automatically excluded from consideration.
Stephanie Pfeifer, the IIGCC’s chief executive, said president Jean-Claude Juncker’s plan had the potential to “usher in a new era of low-carbon infrastructure investment ” and proposed a number of changes to achieve this.
The IIGCC’s paper, authored with input from investors including French civil service pension scheme ERAFP, PensionDanmark, PGGM and the UK’s Universities Superannuation Scheme, argued that the Commission needed to play a greater role in designing renewable energy policies, as changes still posed a significant risk.
“EU-level guarantees should be coupled with some protection against risks from retroactive policy changes since this risk, according to our experience, increases with worsening macroeconomic conditions,” the paper says.
“This should also cover renationalisation risk.”
Retroactive changes to the regulatory framework have seen pension funds burned by renewable projects, with a number of Danish schemes – including PensionDanmark – in 2010 challenging the Spanish government over changes to solar feed-in tarrifs.
For its part, pension asset manager APG previously cited uncertainty over feed-in tariffs as one of the reasons it was reluctant to invest in Dutch off-shore wind power projects – a stance it changed earlier this week.
It also recommended infrastructure projects be aggregated as a way of diversifying the risk to investors, echoing earlier comments by IIGCC chairman Donald MacDonald.
On a member state level, the investor coalition urged governments to draft industrial strategies setting out how each country would transition to a low-carbon economy, with development banks boosting the EFSI’s fire-power by contributing to the fund.
Philippe Desfosses, chief executive of ERAFP, which contributed to the IIGCC’s paper, argued that institutions could play a greater role than at present in funding infrastructure projects.
“Many investors have fallen short of their target allocations to infrastructure and can invest more,” he said.
“We want to invest more, but we need the right policies.”