Ceres, UN urge capital market actors to close vast clean energy investment gap to $1 Trillion annually
NEW YORK, NY Jan 15, 2014
Nearly 500 leading investors meeting today at the United Nations see major growth potential for ramping up green bonds and other clean energy investments to the levels necessary in order to avoid the worst impacts of climate change.
Despite a drop in global clean energy investments in 2013, institutional investors expressed strong agreement on the urgency for boosting investments in low-carbon technologies. Much of the discussion focused on elevating clean energy investments by an additional $1 trillion per year in order to limit global warming to two degrees. Ceres announced a Clean Trillion paper with 10 recommendations for investors, companies and policymakers to scale up clean energy investments to $500 billion per year by 2020 and $1 trillion per year by 2030.
“Quite simply, there’s a huge clean energy investment gap,” said Jack Ehnes, CEO of the California State Teachers’ Retirement System (CalSTRS), the nation’s second largest public pension fund managing $146 billion in assets. “Meeting the $1 trillion a year goal will be a challenge, but it is where we need to be in order to protect and grow our portfolios and to ensure the long-term sustainability of our planet.”
Ceres acknowledged the barriers to investing an additional $36 trillion in clean energy between now and 2050 – the levels the International Energy Agency has called for to limit global warming – but also focused on the opportunities associated with clean energy investments and the risks posed to institutional investors’ portfolios by not taking action.
“Cost competitive renewable technologies and attractive investment opportunities exist right now, but we’re still not seeing clean energy deployment at the scale we need to put a dent in climate change,” said Ceres president Mindy Lubber, whose group helped organize the Investor Summit on Climate Risk in collaboration with the UN Foundation and the UN Office for Partnerships. “Companies and investors must support the adoption of the necessary policies that that will open the floodgates for investment capital from all asset classes to flow into clean energy.”
Today’s event comes in advance of the UN Secretary-General’s Climate Summit in September, where he will seek to raise ambition, including among business and investors, towards a new universal agreement on climate change by 2015. The investors were urged today by Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, to continue seeking opportunities to invest profitably in clean energy solutions and support the international climate process.
“Governments and investors have pivotal, mutually supportive roles to play in accelerating the transition to the low carbon economy —one that can combat climate change, generate jobs and tackle a range of challenges from natural resource scarcities to health-hazardous air pollution,” she said. “Smart policies, creative incentives and innovative financial instruments by governments are already catalyzing a shift: it is time to scale these up world-wide. Meanwhile investors need certainty, a phasing out of fossil fuel subsidies in order to level the playing field and full disclosure of companies ‘carbon footprints’ in order to make informed decisions.”
Bloomberg New Energy Finance released new research data at the Summit showing that global clean energy investment was $254 billion in 2013, a 12 percent drop from the revised $289 billion in 2012. BNEF attributed the decline to a continued sharp reduction in cost of photovoltaic systems and impacts on investor confidence due to policy shifts regarding renewable power in Europe and the U.S.
A number of positive trends emerged, however. Investment in clean energy via the public markets more than doubled as rising share prices restored some confidence in the shares of solar and wind manufacturers. Investors also showed enthusiasm about new areas such as electric vehicles and renewable power project funds.
“Despite the drop in global investments in 2013, it is possible to close the investment gap by first, bringing capital costs down for clean energy projects and second, more properly pricing fossil fuel capital costs which are artificially low,” said Mark Fulton, senior fellow for Ceres who authored the Ceres paper, Investing in the Clean Trillion: Closing the Clean Energy Investment Gap. “There needs to be a global push to put the necessary financing vehicles and policies in place to bring capital costs down and enable the capital markets to realize clean energy’s vast potential.”
The Ceres paper is available at www.ceres.org/cleantrillion. Recommendations include:
Mobilize Investor Action to Scale Up Clean Energy Investment
1. Develop capacity to boost clean energy investments and consider setting a goal such as 5 percent portfolio-wide clean energy investments
2. Elevate scrutiny of fossil fuel companies’ potential carbon asset risk exposure
3. Engage portfolio companies on the business case for energy efficiency and renewable energy sourcing, as well as on financing vehicles to support such efforts
4. Support efforts to standardize and quantify clean energy investment data and products to improve market transparency
Promote Green Banking and Debt Capital Markets
5. Encourage “green banking” to maximize private capital flows into clean energy
6. Support issuances of asset-backed securities to expand debt financing for clean energy projects
7. Support development bank finance and technical assistance for emerging economies
Reform Climate, Energy and Financial Policies
8. Support regulatory reforms to electric utility business models to accelerate deployment of clean energy sources and technologies
9. Support government policies that result in a strong price on carbon pollution from fossil fuels and phase out fossil fuel subsidies
10. Support policies to de-risk deployment of clean energy sources and technologies
In support of green banking and debt capital markets, a number of banks – including Ceres’ Company Network member Bank of America – published the “Green Bond Principles,” the first-ever voluntary disclosure standards for issuing green bonds.
“Through their cooperation on the Green Bond Principles, the banks are promoting transparency and integrity in the development of the green bond market,” Lubber said. “This is the type of thinking that needs to be encouraged if we are to reach the Clean Trillion goal.”
For more information, visit www.ceres.org/cleantrillion and http://www.ceres.org/investor-network/investor-summit.