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PRI board bemoans institutional climate role in letter to Copenhagen heads of state

Investor interests have had a ‘minimal foothold’ in discussions, says initiative.

The board of the $18 trillion United Nations Principles for Responsible Investment has written an open letter to the heads of state that gathered at COP15 in Copenhagen last week, claiming that the role of institutional investors is not being taken seriously in the fight against climate change. The Copenhagen conference ended in controversy on Friday last week after world leaders failed to produce a legally binding treaty on the reduction of CO2 emissions. Adding to the criticism, the board of the PRI, which represents more that 650 institutions, said in its letter that the role of institutional capital had only taken a “tentative foothold” in the Copenhagen negotiations. It said this was despite estimates suggesting that at least 80% to 85% of the finance and capital required in response to the mitigation and adaptation needs of climate change would likely come from capital markets. Consequently, the PRI board said private investors needed “clear recognition” of their financing role in any eventual agreement coming out of Copenhagen, or from subsequent United Nations meetings planned for Bonn and Mexico in 2010. The letter said Copenhagen had been sharply focused on public, overseas development assistance-type transfers from north to south. It said this had come partly as a result of highly sensitive fears among developing countries of possible reductions in public financing and aid-related commitments associated with climate change. However, the PRI claimed that even in the “most optimistic of scenarios”, public funds pledged by industrialised countries for developing countries from 2013 onwards, would amount only one sixth to one fifth of the capital required.The letter, signed by Donald Macdonald, chairman of the PRI on behalf of the initiatives asset owner members, said: “COP15 has to deliver, therefore, an indication of how the remaining four fifths of the required capital and finance will be mobilised. At worst, private investment mechanisms and capital markets may not be referenced in a COP15 agreement, or subsequent agreements, for reasons of political expediency.”
It added that investors would be looking for clear signals from Copenhagen as to the way an eventual agreement frames future public financing mechanisms and encourages public-private investment partnerships. It said investors would judge Copenhagen on its ability to free up flows of private capital, at scale, into climate change mitigation and adaptation in both developed but especially developing countries. The Institutional Investors Group on Climate Change (IIGCC), a forum for collaboration on climate change for European investors representing EUR 4 trillion in assets, also backed the need for firm carbon reduction guidelines by the end of 2010. Peter Dunscombe, chairman of IIGCC said: “The momentum for greater action on climate change centred on Copenhagen and the progress made by individual countries should be viewed positively. However, global decision-makers must ensure that this same momentum is not now lost. We urge them to work quickly to agree a legally-binding global framework which will kick start the development of a fully functioning international carbon market and provide a context for alternative financing mechanisms. This is an important catalyst to mobilise the assets of those who want to invest in environmental change.”