UN head looks to institutional investors to de-carbonize, suggests bond market for low-carbon assets

Ban Ki-moon addresses International Development Finance Club

United Nations Secretary-General Ban Ki-moon has said institutional investors such as pension funds have a key role in de-carbonizing the global economy – and that a transition to a green economy will be almost impossible if they don’t move towards low-carbon assets.
He also floated the idea of a secondary bond market for low-carbon assets.
Mr. Ban was speaking at the annual meeting of the International Development Finance Club (IDFC) in Washington earlier this week. The IDFC is the network of national and sub-regional development banks that is chaired by Ulrich Schröder, CEO of Germany’s development bank KfW. Its current focus is clean energy and sustainable development.
“Pension funds, insurance companies and sovereign wealth funds are already owners and creditors of large and predominantly high-carbon segments of the global economy. Yet only 1% of pension fund assets were invested in infrastructure projects,” he said.
He added that a transition to a green economy would be“virtually impossible if this enormous financial asset class does not itself transition towards low-carbon assets.”
It would require new investment vehicles and “bankable projects” that can tap new sources of capital. Mr. Ban went on: “I am interested in your views on proposals such as the creation of a secondary bond market for low-carbon assets with the help of your best performing projects.”

He acknowledged that transaction costs and lack of understanding of investment opportunities are also key barriers, so he sought views on how the world’s development banks can make low-carbon projects more attractive to institutional investors.

He said he would “reach out” to different groups of institutional investors in the coming months.

Ban noted that development banks within the IDFC have provided $79bn in climate financing in the last year alone, but he encouraged his audience to double its portfolio of adaptation financing. Ban Ki-moon speech