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World’s Biggest Investors Call for a Price on Carbon

From GreenBiz, Published 23 September 2014

As they do preceding each U.N. Climate Summit, many of the world's largest institutional investors sent a letter calling on world leaders to aggressively act on climate change.

Some 340 global investment managers issued the statement, representing $24 trillion in assets, up from $13 trillion in 2009 before the Copenhagen summit. Signatories include BlackRock, Calvert Investments, BNP Paribas Investment Partners, Standard Bank, CalPERS, PensionDanmark and Deutsche Bank.

In the past, they called for a strong international treaty and outlined what it should include. This time, they are calling for a "stable, reliable, economically meaningful" price on carbon — either through a tax or cap-and-trade — that "helps redirect investment commensurate with the scale of the climate change challenge." They also called for fossil fuel subsidies to be phased out.

"Stronger political leadership and more ambitious policies are needed in order for us to scale up our investments." Gaps and delays in moving forward on such policies increase investment risks because the physical impacts of climate change "will increase the likelihood that more radical policy measures will be required to reduce greenhouse gas emissions."

Investments are critical, they say, pointing to the minimum of $1 trillion a year (by 2050) necessary to limit temperature rise to 2 degrees Celsius, according to the International Energy Agency. Currently, just $254 billion is being invested.

Currently, the world is headed to 6 degrees C, said IEA. Taking into account countries' stated targets for efficiency and renewables, the world is headed for a 4 degrees C scenario.

"The perception prevails that we need to choose between economic well-being or climate stability. The truth is that we need both. What is needed is an unprecedented re-channeling of investment from today's economy into the low-carbon economy of tomorrow," IEA said.

In an accompanying report, it outlined investments it has been making to further the transition, such as making direct investments in low carbon technologies, creating funds that invest in those companies, engaging with public corporations via shareholder resolutions and reducing exposure to fossil fuel and carbon-intensive companies.

  • Danish pension fund PKA is ramping investments in wind farms to $1.5 billion by the end of 2015.
  • Swedish pension fund AP4 is decarbonizing its entire $20 billion portfolio of publicly traded companies.
  • ASN Bank in the Netherlands to become fully carbon-neutral by 2030.
  • TIAA-CREFF cut the carbon footprint of its real estate portfolio 17 percent.
  • Zurich Insurance Group is investing in up to $2 billion in green bonds.
  • Global bank ING has reduced its energy allocation on loans from 63 percent to 13 percent for coal plants, while raising the allocation for renewable energy from 5 percent to 39 percent.

They also launched an online database that includes many of their investments, the Low Carbon Investment Registry. It will give the public and policymakers a better understanding of how private capital is flowing into low carbon investments.

The United Nations Environment Program's Finance Initiative worked with four investor groups to coordinate these actions: Ceres' Investor Network on Climate Risk; European Institutional Investors Group on Climate Change; Investors Group on Climate Change in Australia and New Zealand; and Asia Investor Group on Climate Change.

For additional reading regarding carbon management, please refer to the following links:

From Laggards to Leaders: Developing Carbon Management Systems for a Low-Carbon Future
DACH Region Announces Investor Scores for Carbon Emissions
Carbon Accounting Methods for Estimating Scope 3 Emissions