Responsible Investor

Why investors must examine the $1.75 trillion climate change action plan

$10bn clean tech investment plus real estate goals shows where enlightened investors are heading.

The action plan announced last week by the Investor Network on Climate Risk, a coalition of US and European investors under the responsible for over $1.75 trillion (€1.2 trillion) in assets, was a huge boost to institutional investors worldwide. All are, or should be, grappling with how they can avoid contributing to global warming and simultaneously benefit from their position as long-term capital owners in what is increasingly being seen as a fundamental shift in the way investments are made. To hear the biggest US investors, including CalPERS and other public pension giants, commit, amongst other things to a goal of deploying $10bn to clean technology companies collectively over the next two years, is vitally important when the topic comes up at, as it must, at pension trustee/board meetings. If the world’s biggest pension funds have taken the view that climate change is both a significant risk and opportunity, why are medium sized and smaller funds not yet doing more?
The question is not going away if the world is to meet the challenge of reducing greenhouse gases in line with the

60-90% reductions below 1990 levels by 2050 that the United Nations Panel on Climate Change (UNPCC) recommends. Investors that are not up-to-speed risk more than just contributing to eco-damage. They also risk compromising returns and missing out on long-term potential. As the coalition puts it: “Climate change presents both material investment risks and significant opportunities.”
Nonetheless, the $10bn figure raises questions. Can the institutions seriously hope to put such large amounts of capital to work so quickly in the clean tech field? And what about the prospect of a bubble? The amount looks more reasonable if you break it down to a couple of hundred million each among the action plan signatory investors, particularly when you recall that leading institutional investors in clean tech like the UK’s Universities Superannuation Scheme are aiming for allocations in the region of €500m in the coming years. The huge growth in the number of clean tech companies coming to market as well as the proliferation

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