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Impact Investing

IPE special report May 2018

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Investor support for action on climate change policy doubles

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  • Investor support for action on climate change policy doubles

UK - Twice the number of investors than three years ago are now urging governments and international policymakers to take new and meaningful steps in the fight against climate change.

In a joint statement, a group of 285 investors representing more than $20trn (€14.5trn) in assets, stressed the urgent need for policy action that stimulates private sector investment into climate change solutions and creates jobs, and is essential for ensuring the long-term sustainability and stability of the world economic system.

Investor support for climate action has more than doubled since November 2008, when 150 investors with $9trn in assets under management first came together to urge government leaders to act on climate change.

Current levels of investments in low-carbon technology and infrastructure are substantially lower than the $500bn per year deemed necessary by the International Energy Agency to hold the increase of global average temperatures below 2 degrees Celsius - the target agreed in Cancun last year.

Stephanie Pfeifer, executive director at the IIGCC, added: "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 favour of low-carbon investments."

Wolfgang Engshuber, chair at the Advisory Council of the Principles for Responsible Investment (PRI), 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 needed to transform the world's energy supplies and transport systems. Investors will look for an outcome from Durban that goes a long way to providing them with the certainty they seek that concerned governments will indeed create and sustain such an environment."

Co-ordinated by the US-based Investor Network on Climate Risk (INCR), the European Institutional Investors Group on Climate Change (IIGCC) and the Investors Group on Climate Change (IGCC) in Australia and New Zealand, alongside the United Nations Environment Programme Finance Initiative (UNEP FI) and the Advisory Council of the PRI, the statement represents the largest ever grouping, by both number of signatories and assets under management, to call for policy action on climate change.

The 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 toward climate change solutions, including appropriate government incentives to compensate for heightened risk and sufficient scale of technology deployment.

The report - which includes case studies - also emphasises that long-term policy stability is critical and retroactive changes can significantly damage investor confidence.

Investors sent the statement and report to the G20 and other governments in anticipation of the United Nations Framework Convention on Climate Change conference in Durban in November/December.

Investors will engage with policymakers there and call for domestic and international policy action including:

The definition by governments of clear short, medium 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 favour 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

International policy recommendations include:

Continued work toward a binding international climate change treaty that includes all major emitters and sets short, mid, and long-term greenhouse gas emission reduction targets Support the development of the Green Climate Fund and other comparable funding mechanisms Accelerate efforts to reduce emissions from deforestation and forest degradation (REDD and REDD+)

Signatories to the statement include financial institutions, state treasurers, controllers, pension fund leaders, asset managers and foundations worldwide.

The 2011 Global Investor Statement on Climate Change and a list of signatories can be found here.

 

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