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AP funds back call for 'ambitious' framework to grow climate bond market

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Asset owners and managers worth $2.2trn (€1.8trn), including Sweden’s AP funds, have urged governments to introduce guarantees and tax incentives to encourage the growth of green bonds.

A statement by 17 investors – including the four Swedish buffer funds, Dutch pension manager MN and the California Teachers’ State Retirement System – said those issuing green and climate bonds should ensure the environmental impact of issuances is independently assessed.

It added that governments should encourage the market’s growth through policy initiatives and regulation, offering guarantees, tax credits and other means that allow the signatories to address climate change while meeting obligations to beneficiaries.

The statement also said “clear and independent” industry standards were needed, and that all projects needed to be “sufficiently ambitious” to meet emission-reduction targets while being economically feasible.

“We, as investors and fiduciaries, understand we have a responsibility to address threats to the future performance of our investments from climate change, as well as a responsibility to secure our clients’ savings through sustainable and responsible investments,” they said. 

The Climate Bonds Initiative is currently working on voluntary industry standards for a number of issuances, with the European Investment Bank recently joining a working group tasked with agreeing standards for agricultural bonds.

The organisation also recently launched a public database of green bond issuances, including links to issuances that have been assessed externally.

The call from investors comes less than a week after the climate change conference in Lima, laying the groundwork for a comprehensive agreement in Paris next year.

Speaking after countries at the conference agreed a compromise text – several days after the meeting was meant to conclude – Stephanie Pfeifer, chief executive at Institutional Investors Group on Climate Change, said it was important any deal had credibility.

“Reducing emissions to stay below 2 degrees is going to require investment in clean energy far beyond the levels seen to date,” she said.

“Institutional investors are willing and able to play a big role in financing a low-carbon economy but need strong policy that creates the conditions for this investment.”

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