Mandates and incentives drive climate-conscious investors
GLOBAL - Investors are currently driven by on-the-ground mandates and incentives when it comes to climate change investments, according to research published by Deutsche Bank's asset management division (DeAM).
The report entitled ‘Global Climate Change Policy Tracker: An Investor's Assessment (Climate Tracker)' acknowledged that carbon markets may offer solutions in the long-term but suggested governments need to create transparent, long-term and implement policies which will attract capital and mobilise climate change industries.
"Investors are most attracted to countries and regions with comprehensive, integrated government plans that are supported by strong incentives, such as feed-in tariffs," argued Deutsche Bank's report.
From within the Major Economies Forum (MEF) on Energy and Climate Change countries, which the study focuses on, China, Germany, France and Australia are all seen as having lower risk profiles for climate change investments due to their strong incentives and consistent approaches.
Larger markets such as the US, UK and Canada are deemed moderate risk as they rely on a more volatile market incentive approach.
All other countries in the MEF are moderate risk except for Italy, which has struggled to develop a coherent set of policies that would enable it to achieve its targets.
"What investors want is transparency, longevity and certainty - ‘TLC' - in policy regimes to mobilise capital," said Kevin Parker, global head of DeAM and member of Deutsche Bank's Group executive committee. "Many major emitters such as the US and the UK do not have enough TLC in their policy frameworks."
"Carbon markets may provide policy support to investors in the long term," added Mark Fulton, global head of climate change investment research at DeAM. "However, for the foreseeable future, investors will be focused on mandates and incentives."
The Climate Tracker assigns a risk rating to 109 countries, states and regions based on key government mandates and supporting policy frameworks. It is available online at www.dbcca.com/research.