Investors worth $24 trillion call for global carbon price

Leading pension funds say they want to back green economy but need greater policy certainty from governments

Around $90 trillion will be invested in cities over the next 15 years - but will it be low carbon? (Pic: Jerry Ferguson/Flickr)

Around $90 trillion will be invested in cities over the next 15 years – but will it be low carbon? (Pic: Jerry Ferguson/Flickr)

By Ed King

Blackrock, Standard Bank, Schroders and AXA Group are among 348 leading investors calling for governments to deliver strong political leadership on climate change.

In a statement published today, the diverse group of pension funds and international organisations worth US$24 trillion say a global carbon price is vital to allow them to finance green growth.

“We, the institutional investors that are signatories to this Statement, are acutely aware of the risks climate change presents to our investments,” they write.

“In addition, we recognise that significant capital will be needed to finance the transition to a low carbon economy and to enable society to adapt to the physical impacts of climate change.”

The statement comes five days before over 120 heads of state gather in New York for a UN climate change summit, aimed at boosting efforts to secure a carbon cutting treaty in 2015.

Report: UN summit set for major carbon pricing announcement

A World Bank report on international efforts to price carbon is expected to be one of the highlights of the meeting, with a senior official telling RTCC it would reveal a “substantial number” of countries and businesses now account for CO2 use.

The statement’s signatories, who also include the BBC and BT pension schemes, the Quakers and Rockefeller Asset Management, argue they can play a central role in delivering a low carbon economy.

“Stronger political leadership and more ambitious policies are needed in order for us to scale up our investments,” they say.

“We believe that well designed and implemented policies would encourage us to invest significantly more in areas such as renewable energy, energy efficiency, sustainable land use and climate resilient development, thereby benefitting our clients and beneficiaries, and society as a whole.”

The investors list a set of demands they say will help boost finance flows, which include plans for phase out fossil fuel subsidies, support for low carbon innovation and more efficiency standards.

Achim Steiner, UN environment chief, welcomed the statement.

“Having such a critical mass of them demand a transition to the low-carbon and green economy is exactly the signal Governments need in order to move to ambitious action quickly,” he said.

Funding low carbon energy systems and helping developing countries move from fossil fuel based economies is one of the main challenges facing efforts to tackle climate change.

The level of investment needed was highlighted this week by the New Climate Economy report, which said over US$90 trillion will be invested in infrastructure in the world’s cities, agriculture and energy in the next 15 years.

“If we choose low-carbon investment we can generate strong, high-quality growth – not just in the future, but now. But if we continue down the high-carbon route, climate change will bring severe risks to long-term prosperity,” said the study’s co-chair Lord Stern, a former World Bank economist.

Pricing push

Renewed focus on international backing for carbon pricing and emissions trading could be one of the most obvious achievements of the upcoming Ban Ki-moon summit, say officials close to the process.

Dirk Forrister, chair of the International Emissions Trading Association (IETA) and a former White House climate official, expressed the hope it will “kick off a new level of debate at a high level”.

He added: “We hope what we achieve is the message of this breakthrough with business and heads of state and they start to take it more seriously. This is a critical opportunity to get good architecture in place.”

In the same conference call, IETA policy director Jeff Swartz said the summit could mark the start of efforts to integrate support for CO2 trading into the 2015 climate deal.

“It will be the first time government leaders have the chance to talk not only about the importance of the Paris agreement and all it can achieve but the importance of carbon pricing,” he said.

Carbon markets and taxes operate in the US, EU and China to varying degrees, while many multinational companies now price carbon internally.

Next week IETA and the Harvard Kennedy School will release a report outlining how these markets can be linked together.

Forrister described it as IETA’s “straw proposal” for a global pricing system.

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