Investors’ group challenges EU on climate change

The Institutional Investors Group on Climate Change will present a position paper to the European Commission this week, giving momentum to the dialogue between investors and policy makers, and offering a united institutional investors’ voice on the requirements for the successful mobilisation of private investment in climate change mitigation. Amanda White talks with the chair of the IIGCC, Ole Sorensen (pictured).

A report on “Shifting private capital to low carbon investment” addressing climate change and energy policy at a European level presented by the Institutional Investors Group on Climate Change (IIGCC) to the European Commission this week signifies an evolution in investor communication with the European Commission.

Ole Beier Sorensen, chief of department, research and strategy at ATP and chair of the IIGCC says this is a significant step in the life of the organisation.

“We try to provide a joint platform and a unified voice into the debate and policy process. The IIGCC report marks the potential for change in communication and we hope a platform for a continued dialogue with relevant European institutions,” he says.

The IIGCC membership, of 65 investors, includes large pension fund investors such as ATP, APG Asset Management, the Universities Superannuation Scheme, the Swedish National Pension Funds 1-4, and PGGM Investments, and asset managers such as BlackRock, HSBC, and Schroders.

The purpose of the report, Sorensen says, is to outline the message that the key to combating climate change lies with private investors, but the investments needed cannot be mobilised at the scale and pace needed unless it is assisted by a sustained, credible long-term policy framework.

“The combat to counter climate change will be won or lost in the hands of private investors, but we need clear frameworks and as is well-known, so much in this field is policy driven,” he says.

“Our feeling is there is a very strong willingness on behalf of the EU to enter in a dialogue on this.”

The European Commission certainly has climate change firmly on its agenda, testament to that is the speech by Janez Potocnik, European Commissioner for the Environment at the Green Alliance Conference in London last week. To read “Europe: Looking ahead on climate change” click here. (H:\top1000\2010\Sept22\EUclimate change.htm)

But Europe does face some short- and mid-term obstacles that Sorensen and his peers are firmly aware of.

“The climate is changing, but there is a complicated situation in Europe, and there are still significant uncertainties with respect to the way forward. And the current financial crisis doesn’t make things easier. While some countries are firmly behind a more ambitious 30 per cent target for 2020, others may rely heavily on high carbon-intensive industries and energy and they may have other mid- and short-term considerations, it is complex,” Sorensen says.

ATP, for whom Sorensen works, has sizeable climate change investments on a number of levels. Being a very large Danish pension fund, it is overexposed to Danish industry, which he says has a significant overrepresentation of companies engaged in climate relevant activities such as insulation, water pumps, biofuels and wind farms.

In addition the fund made a commitment to allocate €1 billion to climate change activities in developing countries within three years.

While Sorensen says that commitment still remains, the fund realises it may take more time.

“Copenhagen didn’t deliver as expected, so we haven’t seen the development of national action plans at quite the pace expected,” he says. “For deal flow to pick up, it must be policy driven but that is not happening nearly to the extent that we hoped. We just don’t see hundreds of large-scale projects calling for funding and we expect it will take more time to invest the €1 billion.

Sorensen says 85 per cent of investment must come from private sources, and half of that must take place in emerging countries with the lion’s share relating to China, India, Indonesia, Brazil and South Africa.