Climate change investors call for greater policy coordination

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The Institutional Investor Group on Climate Change (IIGCC) has criticised the lack of coherent regulatory output on tackling the issue and said all investors needed to begin thinking about the consequences.

Chair of the group, Donald MacDonald, said institutional investors had the capital but lacked the support of an appropriate regulatory framework or policies.

“In many cases, energy regulation, pensions regulation and insurance regulation are simply not integrated,” he said.

“The IIGCC has been engaging with the European Commission about the perverse impact well-intentioned regulation might have, for example, on issues around energy unbundling and pension and insurance fund solvency.”

MacDonald, also a trustee at the £42.6bn (€60bn) BT Pension Scheme, was speaking at a private equity conference supported by the Principles for Responsible Investment (PRI).

He lamented the progress on policymakers’ attempts to limit global temperatures to within a 2⁰C increase, and said every increase took the world closer to the “tipping point for runaway climate change”.

“As investors, whether pension funds, fund managers, general partners or limited partners, we need to think about the consequences of our investment policies and decisions,” he said.

However, MacDonald praised private equity investors’ involvement in climate change and said it had become a mainstream discussion.

Research from consultancy PwC showed institutional investors wanted private equity firms to quantify responsible investment within their holdings.

The survey showed that 74% stated environmental stances, alongside social and governance concerns.

However, only 19% of investors approached managers pushing for further evidence.

“Limited partners and general partners are well placed to help make that transformational step-change the world needs, but we need to have real leadership from policymakers, and I sincerely believe investor engagement with them is not only highly desirable but absolutely necessary,” MacDonald added.

Additional research from Mercer and LGT Capital Partners showed the overwhelming majority of asset owners considered environmental issues when selecting private equity, property and infrastructure managers, but less so with hedge funds.

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