Pension funds should be providing the “heavyweight capital” to improve the cross-border connectivity of energy networks but are being held back by a lack of investment opportunities, according to a trustee at the BT Pension Scheme (BTPS).
Donald MacDonald, also chairman of the Institutional Investors Group on Climate Change (IIGCC), said improving the connectivity of national energy networks would reduce energy costs and allow for greater efficiencies in providing renewable energy.
During the launch of a letter signed by more than 340 institutions, worth $24trn (€18.5trn), which called for governments to address the regulatory gaps holding back low-carbon investing, MacDonald said he accepted governments no longer had “infinite volumes of money” to finance the transition.
As a result, private capital needs to be attracted to such projects, he said.
“We really do need more investable opportunities,” he said. “There is actually a lot more money available than there are, presently, investable opportunities.”
MacDonald said institutions could be providing the “heavyweight” capital for the interconnection of energy markets.
“Greater interconnection between the European grids would actually improve the efficiency of renewables because we’d be able to transport the electricity much further and much more efficiently,” he said.
“That actually would improve the efficiency and reduce the unit cost of providing renewable. We can do that, simply by adjusting our existing portfolios, but the opportunities have to be there, and the regulatory framework has to be there.”
MacDonald has previously criticised that many infrastructure projects were packaged in a way that was “sub-optimal” for pension funds, and called for greater risk-sharing.
During the launch, Frank Pegan, chief executive of the AUD5.3bn (€3.7bn) Catholic Super and chair of the Australian and New Zealand counterpart of the IIGCC, praised the work undertaken in conjunction with the letter to launch a low-carbon investment register, which lists details for several hundred successful climate-friendly investments.
“It shows we are currently investing across the whole economy in addressing carbon,” Pegan said, noting that it should hopefully act as a talking point for policymakers.
Speaking on behalf of another supporter of the campaign, Anne Simpson, director of governance at the $300bn California Public Employees’ Retirement System, criticised the market failure caused by the lack of global carbon pricing and called for an end to tax subsidies to fossil fuel companies that were “distorting” investment decisions.
Her views were echoed by Pegan, who described the Australian government’s recent abolition of its carbon emissions trading scheme as “backward” and said the discussion to curb the country’s renewable energy target showed there were risks across all global economies “unless we continue to push for a strong policy framework”.
Anne Simpson will be discussing shareholder activism at the IPE Conference & Awards in Vienna on 20 November