Global warming will force investment, despite crash: DeAM report

Volatility in climate change sectors can recover with right regulation, says fund manager.

The accelerating pace of global warming will force governments to invest more heavily in climate change mitigation and adaptation despite the current market crash, according to a research paper issued by Deutsche Asset Management (DeAM). However, the fund manager said that if governments provided the right regulatory framework then they could expect to see investors also commit assets to the fight against climate change.
The paper, titled: “Investing in Climate Change 2009 – Necessity and Opportunity in Turbulent Times,” by the fund manager’s Global Climate Change Investment Research team, said the economic downturn offered governments across the developed world a prime opportunity to boost their spending on ‘green’ infrastructure as a stimulus to avoid severe recession. Kevin Parker, global head of DeAM and a member of the bank’s Group Executive Committee said new research showed carbon in the atmosphere had reached an 800,000-year high and that global warming may be only a few years away from the point of no return.Parker said: “The aim must be to create a clear long term regulatory regime that puts an accurate cost on carbon and encourages the development of alternatives. If governments recognize the necessity of creating the right regulatory environment, investors will recognize the opportunity and step in. Severe though it is, the current financial crisis can eventually be fixed, and should not be used as an excuse for inaction.”
Mark Fulton, DeAM’s global head of climate change investment research, added: “Energy efficiency technologies are obviously highly desirable in economies facing recession. Infrastructure stimulus can be tied directly to climate-sensitive sectors such as power grids, water, buildings, and public transport, which present a vast field for the creation of new technologies and jobs. Governments have before them a historic opportunity to ‘climate proof’ their economies’ as they upgrade infrastructure as a core response to any economic downturn.” The report says, amongst its findings, that while climate change sectors have been caught up

in the volatility of the credit crisis, it believes that with regulatory support, they should recover well. It said ‘value’ had already been established in many sectors. Despite the current fall in oil and gas prices, DeAM said it expected a longer-term return to higher rates. It said weaker coal prices would need to be combined with a higher carbon price for its use in order to maintain a key backstop to the deployment of clean energy.The report said carbon pricing was the key long-term market-related climate change policy. For investors, it says there is a need to understand the ‘broader and deeper’ stages of development of clean technology in order to invest with security.
The report can be found at: