Clean Tech: "It's the institutional investors, stupid."

February 15th, 2008 by Timothy B. Hurst

Nearly 50 leading U.S. and European institutional investors managing over $1.75 trillion in assets released a climate change action plan at the United Nations that calls on Congress to introduce national policy to reduce greenhouse gas emissions by up to 90% below 1990 levels by 2050. U.S. institutional investors also pledged $10 billion dollars over two years in renewable energy technologies and project development, energy efficiency, green building and clean technologies. The group of investors also wants the US Securities and Exchange Commission (SEC), to insist that companies listed in New York and elsewhere disclose their exposure to climate change risk. The plan aims for a 20% reduction in energy used in core land and building investments over a three-year period.

The two largest pension funds in the US, the California Public Employees’ Retirement System, with some $246.7 billion under its management, and the California State Teachers’ Retirement System, $168.8 billion strong, were both on board with the institutional investor coalition. These two large and incredibly wealthy pension funds tend to be leaders in the institutional investor arena. George McPherson, senior managing director of the DC-based private equity firm Global Environment Fund said he expects other pension funds to create more programs geared towards clean technology over the next year.

The initiative was unveiled at the Investor Summit on Climate Risk hosted in New York by the United Nations Foundation and Ceres’ Investor Network on Climate Risk. Ceres is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.

John Sweeney, the president of the AFL-CIO, a federation of unions, told the summit that some of the $5 trillion of union workers’ retirement funds should be invested in ways that help fight climate change. “These deferred wages of working people are the capital that can fuel the energy economy of the future,” he said.

Summit attendees were also given information from a new report, which concluded that major investments in energy productivity over the next 10 years could bring in double-digit rates of return.

The Take-Home Points:

Institutional investors are one of the most important macro-economic drivers in this economy. Many of the assets that the large institutional investment funds have to invest, are collections of people’s retirement funds and 401Ks. People often do not worry a whole lot about their pension funds, and how they are invested, as long as they see a return on their investment. With that said, it is good to see institutional investors combine their tremendous clout to put pressure on the federal government while taking some social responsibility themselves. The record-breaking profits of the big oil companies like Exxon Mobil and Chevron over the last few years was made possible, in part, by the large amount of broad-based investment from large institutional investors. People may talk out of one side of their mouth about the evils of big oil without even knowing that their retirement nesteggs are being lined with the profits of those same companies. Institutional transparency and accountability are important to socially-conscious investors, and I see this as a step in the right direction. Clean tech investors (both large and small) want long term security and stability before they are willing to invest significant capital. Investors and industry need certainty over what the regulatory regime will be over the next two to three decades before they release the billions of investment capital that will finance the shift we need to make to a low-carbon economy.

ClimateBiz

Earth Times

Reuters

LiveMint (India)

International Herald Tribune

Photo Credit: chatirygirl via flickr











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