Researchers at the Organisation for Economic Co-operation and Development (OECD) are planning to map out the channels that institutional investors such as pension funds, insurance companies, investment companies and public pension reserve funds are using to invest in sustainable energy infrastructure.
The study, planned for release this month, will analyse 40+ recent investments by pension funds, and maps the instruments and funds through which clean energy infrastructure can be financed and the ways (such as tools to mitigate risks and techniques to lower transactions costs) that can enable or facilitate these investments.
The paper, “Institutional Investors and Sustainable Energy Infrastructure: Mapping Channels and Approaches to Mobilise Capital” will also provide recommendations for governments to address key barriers and facilitate greater investment by institutional investors.
It has been prepared by Christopher Kaminker, Project Manager of the OECD’s Project on Long Term Investors and Green Growth, and colleagues Kate Eklin, Osamu Kawanishi and Robert Youngman.
Kaminker made a preliminary presentation of the report at the recent Climate Change Summit in New York.
The paper notes how just 1% of the estimated $83trn of institutional assets in the OECD is invested directly in infrastructure and that “an even smaller portion” is invested directly in green infrastructure.
It argues there are seven policy options for addressing the investment challenges and mobilising institutional investment in green infrastructure, ranging from ensuring a stable and integrated “investment grade” policy environment through to setting up green investment banks or refocusing existing public finance institutions.
It cites data from Preqin and HgCapital pointing to a roughly €12bn cumulative investment in EU renewable energy – though it says there is a lack of disclosure by pension funds in specific green bonds and green bond funds.Meanwhile, France’s CDC Climate Research, part of the Caisse des Dépôts state fund, has teamed up with the OECD to examine development banks’ role in climate finance.
The 94-page study called Public Financial Institutions and the Low-carbon Transition analyses the role of PFIs in fostering the low-carbon energy transition. The institutions reviewed include the Caisse des Dépôts itself, Germany’s KfW Bankengruppe, the UK Green Investment Bank as well as the European Investment Bank and the European Bank for Reconstruction and Development. It builds on existing OECD work on low- carbon, climate resilient investment, including the 2012 paper “Towards a Green Investment Policy Framework”.
The report, put together by Ian Cochran and Romain Hubert at CDC Climate and the OECD’s Virginie Marchal and Youngman, shows that between 2010-2012, these five institutions provided over €100bn of equity investment and financing for energy efficiency, renewable energy and sustainable transport projects.
It comes as the OECD is also coordinating an initiative to track climate finance called the Research Collaborative. It is an open network of interested governments, relevant research institutions and international finance institutions. Bodies involved include investor bodies such as the Institutional Investors Group on Climate Change (IIGCC), the [Australasian] Investor Group on Climate Change and the Asia Investor Group on Climate Change.
“The goal is to partner and share best available data, expertise and information to advance policy-relevant research in a comprehensive and timely manner,” the OECD says. A synthesis report will be produced by the end of 2014 and preliminary pilot measurements and ground-testing of methods to track private climate finance and estimate its mobilisation are foreseen for 2015.