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€5trn investor group in climate change plea to European Union

Institutional investors slam emissions trading regime

The Institutional Investors Group on Climate Change (IIGCC), a group of investors with some $5trn in combined assets, have issued a dramatic plea on climate change regulation to the European Union.
They are urging the EU to come to a quick decision on whether or not to unilaterally set a more ambitious emission reduction target for 2020. They say significant benefits can be achieved if the EU moves to signal an ambitious longer-term target for 2030 or 2035.
They claim the bloc’s Emissions Trading Scheme (ETS) has not yet provided investors with the “strong, long-term price signals” needed to commit to long-term low carbon investments.
The IIGCC is seeking clarity on the scheme out to 2030 and wants it to set “ambitious caps to create sufficient scarcity and a robust price signal in line with the longer lifetime of climate relevant assets”.
Without naming names, the body said “retroactive policy changes” at EU member states were significantly reducing investors’ appetite for new low carbon investments. It said: “We recommend that the EU works with member states to draw upguidance and to establish best practice principles that rights are grandfathered to existing projects.”

And the IIGCC wants specific mid- and long-term targets for increased energy efficiency in the buildings sector. This would send a clear signal to investors that standards and regulations will move in a set direction.
The group has released a 23-page study by law firm Norton Rose.
“Policy design must consistently shift the risk reward balance in favour of less carbon intensive investment,” the IIGCC says.
Johan van der Ende, Chief Investment Officer of Dutch pension fund manager PGGM Investments, said: “Currently, institutional investors’ demand for climate related investments outweighs supply of suitable investments.
“We already invest in a wide range of low carbon assets like clean energy and clean technology, but we have the ambition to do more. Long term policy and predictable mechanisms supporting low carbon investments are key to restore the balance between supply and demand and accelerate our investments.”