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Global Investors Managing $20T in Assets Urge Climate Action

It will require $500 billion a year in clean energy investment to keep climate change from increasing global temperatures by two degrees Celsius. If global warming increases by that amount, not only will some of the impacts become irreversible, climate scientists have been warning for years; in fact, impacts such as extreme weather events will multiply.

It is because of this impending crisis that world leaders agreed to a two degrees Celsius limit in global warming at the COP16 meeting in Cancun last year. But the agreement has been followed by an absence of regulatory enforcement, especially here in the US, and greenhouse gas (GHG) emissions in 2010 were the highest ever recorded.

Furthermore, "levels of investments in low-carbon technology and infrastructure are substantially lower than the $500 billion per year deemed necessary," a coalition of institutional investors stated today.

The 2011 Global Investor Statement on Climate Change, issued by the United Nations' Principles for Responsible Investment (PRI), has been endorsed by 285 investors representing more than $20 trillion in assets. Investor groups calling for public policies to stimulate private sector investment include the Investor Network on Climate Risk (INCR), the Institutional Investors Group on Climate Change (IIGCC), and the Investors Group on Climate Change (IGCC).

The Investor Statement recommends that effective and well-designed domestic policies provide long-term certainty in order that appropriate incentives for private investment exist. It also calls for a binding international policy on climate change and funding mechanisms to bring climate-related investment to the necessary scale.

The 2011 statement represents an updated version of an Investor Statement released in advance of last year's Cancun conference. Noting that "public and private investment in clean energy in 2009 was only US$145 billion, far below needed levels," that statement continued, "Private investment will only flow at the scale and pace necessary if it is supported by clear, credible, and long-term policy frameworks that shift the risk-reward balance in favor of less carbon intensive investment."

This year's updated statement, the investors say, is supported by the findings of a recent report that underscores the importance of investment-grade policy and emphasizes that long-term policy stability is critical.

Among other factors, the report observes that the gap between actual and needed investment "reflects the lack of attention paid to the needs and interests of institutional investors when designing and implementing climate change policy."

"When considering low-carbon investments in cleaner and renewable energy," the report continues, "two factors – policy risk and technology maturity – have a dominant influence on investors' overall risk perceptions."

The next meeting of the Conference of the Parties (COP17) to the United Nations Framework Convention on Climate Change (UNFCCC) is scheduled to begin next month in Durban, South Africa.

This article originally appeared on

Investing photo from Shutterstock.

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