Global Finance Community Seeks $1 Billion Investment in Clean Energy

Global Finance Community Seeks $1 Billion Investment in Clean Energy

An unprecedented grouping of pension funds, foundations, European investors and U.S. state treasurers have joined with the United Nations to back a new call for urgent action by the global investment community to tackle the threat of climate change.

Faced with growing evidence of the negative economic consequences of climate change this powerful alliance of institutional investors managing some $3.22 trillion are pressing for capital market regulators to demand more rigorous corporate disclosure of climate risks.

Among other commitments, they are also seeking to unlock $1 billion in capital in the next year for investment in clean technology. The 2005 "Call for Action" was made at the 2005 Institutional Investor Summit on Climate Risk being held at United Nations Headquarters in New York.

Klaus Toepfer, executive director of the United Nations Environment Program (UNEP), told participants at the Summit: "The local and global challenges created by climate change -- environmental, economic and social -- are manifold and will both multiply and accelerate in our lifetimes. For the world's financiers, investors and capital markets the time to act is now."

Toepfer continued: "If our money markets are to manage climate risk more effectively then we must have greater corporate disclosure of how companies are dealing with the economic threats posed by global warming."

The United Nations' environmental head welcomed the 2005 Summit "Call for Action" -- signed by 20 major investors - saying, "investors backing these practical and pragmatic steps send a strong signal to the markets that climate risk is real and needs to be managed aggressively."

The 2005 "Call for Action" came as more than 400 financiers, government and civil society experts met at U.N. headquarters for a summit to explore risks to the investment world resulting from global warming. The summit, which follows on from the first such gathering in November 2003, has been jointly convened by the United Nations Foundation, the United Nations Fund for International Partnerships, the Boston-based U.S. non-government organization CERES and UNEP.

The four co-conveners are backing three post-summit initiatives to support the call for action by the investors. The initiatives are:
  1. A new Climate Risk Disclosure Initiative (CRDI). This will be aimed at enhancing corporations' climate risk disclosure. The effort will focus on disclosure of corporate emissions, climate actions, scenario analysis, strategic analysis, and plans to address climate risks and opportunities.

  2. UNEP and the U.N. Global Compact, working with leaders in the institutional investment community, are developing Principles for Responsible Investment (PRI).

  3. A new forum for International Investor Cooperation in Addressing Climate Risk. This forum will promote collaboration and information sharing among investors internationally about actions to address the financial risks and investment opportunities posed by climate change.
The New York Summit comes shortly after the world's biggest reinsurance companies confirmed that 2004 saw the largest ever insured losses from natural catastrophes.

According to Munich Re, economic losses totaled $145 billion in 2004. This included insured losses of $44 billion from natural catastrophes, the highest ever recorded. Swiss Reinsurance has published statistics that show 2004 was a record year in terms of claims, mainly dues to hurricanes, cyclones and typhoons.

"On the one hand, the negative economic consequences of climate change are clear," said Toepfer. "Yet for the financial and business communities our efforts to adapt to and mitigate climate change and its impacts present emerging opportunities for those with the vision, entrepreneurial flair and commitment to embrace new business challenges," he said.

As well as seeking to understand the economic and financial risks associated with climate change the business world is also awakening to a range of emerging opportunities associated with efforts to tackle global warming.

It is estimated that greenhouse gas emissions trading markets could be worth $2 trillion by 2012 and it is further estimated that the market for clean technologies could be worth $1.9 trillion by 2020.
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