Communication for Sustainable Development

Investors call for global climate change deal at Cancun

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A group of the world's largest investors have issued a call to governments, asking them to take action at the upcoming UN climate summit in Cancun or face a potential economic recession more severe than the recent financial crisis.

The statement was organised by sustainable investment group Ceres and the UN Environment Programme Finance Initiative, and was signed by 259 investors, who manage a combined total of assets worth over $15 trillion (£9.44 trillion). Major investors like Allianz and HSBC were among the signatories, as well as investment groups from developing countries and pension funds from across Europe and North America.
Economic impact

Citing potential climate-related GDP losses of up to 20 per cent by 2050 and the economic benefits of shifting to low carbon and resource efficient economies, investors called for national and international policies that will spur private investment into low carbon technology.

"We cannot drag our feet on the issue of global climate change," said Barbara Krumsiek, chair of the UN Environment Programme Finance Initiative and chief executive of US-based investment firm Calvert Investments.

"Based on the Stern Report, we know these impacts could reach global GDP cuts of an unimaginable 20 per cent per year. Why should we take that risk? The solutions are quickly emerging and we must deploy these solutions to help secure the innovation and sustainable growth our economies need."
UN climate summit

Today's statement comes in advance of key negotiations in Cancun, beginning on November 29, to agree on a new international climate change system to substitute the Kyoto Protocol. The release also comes on the same day as the Cancun Communiqué, signed by approximately 250 businesses around the world, calling on world leaders to deliver significant progress in Cancun.

The statement acknowledges that there is unlikely to be a binding agreement in Cancun, but it argued that investors want to see progress towards a deal that can be agreed upon in South Africa next year.

It urges countries to adopt domestic policies that can help drive investment in low carbon infrastructure, including systems to put a price on greenhouse gas emissions, phase out fossil fuel subsidies, incentivise spending on clean technologies, and encourage corporate disclosure of climate risks.

Global clean energy investment is expected to eclipse $200 billion (£126 billion) in 2010, which is less than the roughly $500 billion (£315 billion) that Bloomberg New Energy Finance and the World Economic Forum said is needed each year by 2020 to restrict warming to below two degrees.

"A basic lesson to be learned from past experience in renewable energy is that, almost without exception, private sector investment in climate solutions has been driven by consistent and sustained government policy," said Ole Beier Sørensen, chairman of the Institutional Investor Group on Climate Change and chief of Research and Strategy at the Danish pension fund ATP.

"Experiences from countries such as Spain, Germany and China show how structured policies can bolster investor confidence and help drive renewable energy investments. These experiences also show how such policies can bring technologies down the cost curve and eventually strengthen their competitiveness."
Lack of US legislation

The group of investors expressed frustration at US failure to deliver climate change legislation, arguing that the standstill on Capitol Hill was leading to increased risks for investors.

North America lags behind Europe and Asia in clean energy investing, supporting $20.7 billion (£13 billion) in renewable energy projects in 2009, in comparison to $43.7 billion (£27.5 billion) for Europe and $40.8 billion (£25.6 billion) for Asia, according to a recent report by the United Nations Environment Programme (UNEP). The gap has increased this year, with the US investing only $4.4 billion (£2.7 billion) in third-quarter 2010 while China's investments topped $13.5 billion (£8.4 billion) and Europe $8.4 billion (£5.3 billion).

"Climate change may be out of vogue in Washington today, but it poses serious financial risks that are not going away and will only increase the longer we delay enacting sensible policies to transition to a low-carbon economy," said Jack Ehnes, chief executive of the California State Teachers' Retirement System (CalSTRS), the second largest public pension fund in the US.

* © Guardian News and Media Limited 2010

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