Institutional Investors Pushing for Government Action on Climate Change

Institutional investors are increasingly conducting climate risk assessments and demanding more action from governments. Socially responsible investing (SRI) is gaining wider market acceptance and it is becoming a ubiquitous part of institutional portfolios, albeit a small part. Government policy could significantly increase the growth of SRI among institutional investors.

A 2012 IIGCC survey of institutional investors managing over $12 trillion in assets showed that 57 percent of those polled conducted climate risk assessments and 26 percent made changes to their investment strategies as a result. Climate change policy factored into manager selection for 78 percent of investors, and over 60 percent of them invested in climate solutions.

Existing green policies have already unleashed billions of dollars of renewable energy investment in China, the United States and Europe. With the right government support, much more could be done to drive green investments.

Institutional investors have made it clear that they want to see more responsible environmental policy from governments. At the end of 2012 an alliance of institutional investors said that the investments and retirement savings of millions of people were being jeopardized because governments had not yet passed tougher emissions standards and offered more generous support for greener energy.

The group said the right policies would prompt institutional investors to significantly increase investments in cleaner energy and energy efficiency. They issued seven action points, including slashing fossil fuel subsidies and boosting carbon markets.

In an open letter to governments the world’s largest institutional investors demanded that governments enact the following policies:

• Clear, consistent and predictable policies that encourage low carbon investment;
• knowledge sharing between governments on effective climate and clean energy policies, building on successful existing national and regional measures;
• stronger international agreements that send clear market signals about the future of climate policy and reductions in greenhouse gas emissions

“Strong carbon-reducing government policies are an urgent imperative,” said Chris Davis, director of investor programs at Ceres, a US-based coalition of investors and green groups.