Financial world calls for carbon price and stronger climate policies to avoid risking trillions in investments

Author:
Ilario D'Amato
Reading time: 3 minutes
19 September 2014

NEW YORK: Nearly 370 world-leading investors representing more than US$24 trillion in assets have called for governments to frame bold and coherent policies to support the low carbon sector in order to avoid gambling massive investments, including the retirement savings of millions of citizens.

With just a few days left to go until the UN Climate Summit, this message for the 125 heads of state and government who will gather in New York is clear: finance is ready to act on climate, but it needs a stable and clear set of rules to fully develop its potential.

Outlining their concern that delayed climate and clean energy policies will jeopardise investments, the group of six investor organizations which includes The Institutional Investors Group on Climate Changesuggests "stronger political leadership and more ambitious policies" are required to ease risk and encourage investments in renewable energy, energy efficiency, sustainable land use and climate resilient development, which would bring benefits to their clients as well as the whole of society.

Climate finance

The statement points out the current level of investments in green business are around US$250 billion a year, far less than the US$1 trillion per year estimated by International Energy Agency to keep global temperature rise under the 2° Celsius line - above which climate disruption can have severe consequences for the planet.

One way of filling the gap suggested by the top investors is carbon pricing, which has been increasingly supported by leading figures such as President Obama and Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change.

A very recent report from CDP proved hundreds of companies see carbon pricing as an opportunity for their business, and are already implementing it into their strategies, often in the form of a 'shadow price' in anticipation of national schemes.

In governments across the world too, more and more emissions trading schemes are being planned or launched to achieve carbon pricing's double goal: reducing CO2 emissions - lowering the ‘cap’ of trading every year - and rewarding companies working on energy efficiency and emission reduction policies.

Adding further weight to the argument for carbon pricing mechanisms is the UN Global Compact and the World Bank Group, which jointly signed a similar statement recently, backing carbon pricing because it “improves the efficiency of the economy, allowing for increased government investments or tax reductions in other areas. Without it, getting the response we need on climate change will be very hard”.

Low carbon investment

The group of leading investors also published a report this week which will help policymakers develop an informed and correct strategy, to encourage capital investments in the low carbon market.

The demand for governments to respond to this economic need for climate action comes also from the Prince of Wales’s Corporate Leaders Group - which gathers leading companies like Coca-Cola, Philips and Tesco. In a statement released yesterday, its patron HRH The Prince of Wales underlines that “taking action on climate change is neither inherently bad for business nor against economic interests; it is, in fact, the only rational choice.”

It's clear the financial world is speaking with one voice to establish new industry norms ahead of the UN Climate Summit in New York, but to reinforce this message, as part of the Summit the UN will also host the Private Sector Forum during the opening session of the General Assembly. The Forum will highlight businesses' successful low carbon measures and aims to inspire new, bold ideas for private-public partnerships.

While the finance sector is ready to act on climate before the costs for citizens and business get out of control, now it is the turn of politics. As the collaborative space for all related events in support of the UN Climate Summit, Climate Week NYC, from September 23-28, will host more than 140 events to facilitate this exchange of low carbon knowledge and projects. For a full list of Climate Week NYC events, please visit ClimateWeekNYC.org and follow the conversation on Twitter using #CWNYC.

By Ilario D'Amato

Read the investors' statement

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