ATP CEO speaks: making a one billion euro Copenhagen statement

Danish pension fund chief Rohde says pension funds need to be first movers on climate change investments.

As the Copenhagen COP-15 summit to find a successor to the Kyoto Protocol closes today in Denmark – in hope or in acrimony – ATP, the Dkr355bn (€48bn) Danish public pensions giant, the country’s largest, has put the potential role of pension funds in the spotlight as vital potential long-term capital providers for solutions to fight global warming. ATP’s €1bn pledge this week to a new climate change fund for investing in emerging economies is real money on the table, with an open invitation to other European institutional investors to join it. Lars Rohde, chief executive officer at ATP, told that it announced the launch during the Copenhagen conference “to make ourselves heard”. He says: “We wanted to make people aware we are here and investing in these areas. We believe there is a challenge for institutional investors to be first in the queue for climate change investments.” Rohde says the background to all its investments in the clean investment space is its belief that climate change solutions will be one of the big drivers of investment returns over the next 40 years: “The World Bank estimates that a huge amount of money will be needed for climate change solutions and that 80-90% will probably come from private sources. The theme has been on our radar for some time and we hope to fully integrate climate change concerns into all of our investments. The more difficult issue is to find a practical way of implementing the theme into our existing strategies.” Regarding the new emerging markets fund, Rohde believes there will be significant demand in developing countries for funds that co-invest in areas such as infrastructure, energy production and smart electric grids: “It is a big area for development and we are simply trying to positionourselves as first movers into these investments, instead of last movers.” Rhode says ATP’s €1bn commitment is likely to be invested in infrastructure projects, but he says the fund will have to be opportunistic, if only because there are not yet too many opportunities around that meet its strict risk/return criteria. “Risk adjusted returns are key – this is not philanthropy. It is also a challenge to identify the right deals and get suitable sustainability screening on investments, says Rohde.
To this end, the fund has been in discussion with other large pension funds, the development banks for Africa and Asia and UN institutions to identify suitable investment projects. ATP has said the new fund will invest in existing growth structures, aid programmes and funds in emerging economies that are overseen by the UN, World Bank and regional development banks. It said a rough outline of how it might invest would be to take a maximum 33% stake in ready-to-implement projects, and add in 50% of leverage capital.

Rohde adds: “The fund is likely to be a special entity within ATP with its own management. That means we need to find the right organisations and people to work with and we are also talking with fund managers, consultants and private equity investors at the moment. The backdrop of Copenhagen is critical though, as Rohde acknowledges: “What we expect and hope from Copenhagen are clear commitments from world society that make it easier to invest. We need a clear and trustworthy framework for investments. If not, these investments will probably be made, but we will need higher returns to overcome the risks.”
RI’s Sustainable Emerging Markets Conference takes place in London on March 3rd: link for further details.