Draft operational principles launched to mobilise climate change investment

Drawn up under UK government’s Capital Markets Climate Initiative

The UK government’s Department for Energy and Climate Change (DECC) has unveiled a set of five draft operational principles to help mobilise private investment into climate change solutions.
They aim to address the issue how public policy and public sector capital can be used to mobilise the estimated trillions of private sector capital needed to mitigate climate change.
The first principle calls for an “early and ongoing” dialogue with institutional investors.
The principles (see below) are aimed at national governments, international climate finance programmes/institutions and the private sector.

The new principles have been drawn up by Dr Aled Jones, Director of the Global Sustainability Institute at Anglia Ruskin University, in his capacity as chair of a working group at the government-mandated Capital Markets Climate Initiative (CMCI).

They grew out of a review of case studies and consultation with members of the CMCI. The CMCI was launched in 2010 to establish public-private dialogue on climate finance and help mobilise and scale up private finance flows.
It has a broad membership; among its institutional investment members are the likes of Aviva, Denmark’s ATP, BP Pension Trustees, BT Pension Scheme, BlackRock, Deutsche Bank, Legal & General, Schroders, Towers Watson, UKSIF and the Universities Superannuation Scheme (USS).

The government describes as a “platform through which to share the growing wealth of financial expertise and experience”.Anglia Ruskin’s Jones said the consultation helped to formulate the “investable landscape for private capital” – whether in developing or developed countries.

“The aim of CMCI is to make a practical difference in this space – that is to actually lead to private capital being invested in climate solutions around the world through well managed and diverse mechanisms.”

The CMCI consulted with banks, pension funds, insurance companies, rating agencies, actuaries, international finance institutions, national government agencies, think tanks, fund managers and other experts.
Meanwhile, UKSIF, the Sustainable Investment and Finance Association, this week released a report – The Future of Investment: Green Infrastructure – showing that sustainable infrastructure is emerging as an increasingly significant asset class.
The 52-page Principles for Investment grade policy and projects is available here

The principles:
  • One: “Early and ongoing” dialogue with institutional investors and the private sector.
  • Two:
    Clear, long term and coherent policy and regulatory framework.
  • Three:
    Price signals should support the deployment of low carbon alternatives
  • Four:
    Realignment of underpinning economic drivers to support sustainable growth.
  • Five:
    Active government programmes of public (climate) finance to support investment grade projects