PRESS CONFERENCE on institutional investor summit on climate risk

 

Nearly 50 leading United States and European institutional investors had released a climate change action plan at the Investor Summit on Climate Risk today, pledging to collectively invest $10 billion in clean technology opportunities over the next two years and to incorporate “green standards” into their investment decisions, correspondents were told at a Headquarters press conference this afternoon.

Co-hosted by the United Nations Foundation, Ceres and the United Nations Fund for International Partnerships, the event was attended by over 450 investors, financial and corporate leaders from around the world.  The signatories to the action plan included state treasures, controllers, pension fund leaders, asset managers and foundations, collectively managing over $1.75 trillion in assets.

Mindy S. Lubber, President of Ceres and Director of Investor Network on Climate Risk, told correspondents that the action plan reflected numerous investment opportunities that existed today, while also seeking to put a dent in global warming and pollution, increase profits and benefit the global economy.  It was about boosting investments in energy efficiency and clean technologies.  It also required tougher scrutiny and analysis of carbon-intensive investments that could pose long-term financial risks.

She added that, as a result of pressure from the Investment Network, many companies were changing their carbon practices, because it was about shareholder value.  The Network was also supporting mandatory caps on carbon.

Also speaking to the press were Denise Nappier, Treasurer of the State of Connecticut; Alex Sink, Chief Financial Officer, State of Florida; Bill Lockyer, Treasurer of the State of California; John Chiang, Controller of the State of California; and Donald MacDonald, Trustee Director of the British Telecom Pension Scheme.

With the participants of this year’s Summit representing some $22 trillion in investments, “we have the clout to take the baton and move forward and make the kind of progress that we haven’t seen in the last decade”, Ms. Nappier said. The financial services community needed to play a pivotal role in moving the world in the right direction.

She said that, given the sweeping nature of climate change, climate risks were embedded in every investment portfolio today, and the action plan urged comprehensive corporate responses to such risks.  But, where there was risk, there was also opportunity.  Money managers were now expected to make buy-and-sell decisions, taking into consideration some of the non-traditional financial factors, including the effects of climate change.  For example, that requirement had been taken into account in the State of Connecticut’s recent search for a pension fund’s general consultant.  An opportunity to invest in a renewable energy project had also been recently discussed.

One of the action plan’s articles required pushing for guidance from the Securities and Exchange Commission (SEC), she added.  So far, such efforts had been a source of frustration.  The SEC viewed the evaluation of risks as ordinary business and, therefore, allowed an omission of requests for reports to shareholders on the evaluation of companies’ climate risks.  The document signed today asked the SEC to require companies to disclose material climate risks as part of their regular securities filings and recognize shareholders’ right to vote on resolutions related to climate change and to enforce existing rules requiring disclosure of material risks.

Ms. Sink said that, as Florida’s “fiscal watchdog,” she was looking after $70-plus billion in state revenues.   Florida was at risk, as a result of the rising sea level, and she believed that the financial implications of climate change were as disturbing as environmental ones.  Having only joined the Investors’ Network on Climate Risk last summer, the State was making great progress.  For example, Florida’s Treasury had been the first one in the nation to require its fund managers to disclose how they were incorporating climate risk into their investment decisions.

California’s Treasurer, Mr. Lockyer, said that his State was among the action plan’s 49 signatories.  Sustainability equalled profitability, and it was California’s intention to see that the world was green, clean and sustainable.

“We must seize the opportunity to make sound investment decisions and protect the environment,” said Mr. Chiang, also from California.  The global renewable energy market was projected to grow from $40 billion in 2005 to $150 billion by 2015.  Demand for ethanol and other bio-based fuels was expected to double in the next four years.  He was proud that California was at the forefront of the clean-tech growth.  For example, several hundred businesses were installing solar panels under the State’s ambitious “million-roof” solar programme.  That 10-year initiative would not only cut the cost of solar power in half within a decade, but also create an estimated 15,000 new jobs in California.

Mr. MacDonald said that the British Telecom Pension Scheme had allocated $1 billion towards a green building development programme and sponsored a study on the impact that climate change would have on its investments.  Among other initiatives of the Pension Scheme, he also mentioned the development of a sustainability rating system (SRS), which evaluated environmental, social and economic characteristics of each property.  As a result of SRS application at several shopping malls, an almost 20-per cent reduction in energy demand had been achieved in a very short period.  The changes did cost money, but it was money well spent, as significant energy reductions improved the cost base.

Responding to a question about the efforts to “move the agenda forward” on carbon emissions, Ms. Nappier said, “we understand the importance of getting the Federal Government and other regulators in alignment with this issue”.  She believed that, with the next Congress, a carbon cap was likely to be put in place.  “We have not only the clout of our dollars, but of the hundreds of thousands of fund beneficiaries, whose financial future is at stake.”  Anyone who had money in the stock market needed to understand that his or her savings were at risk, unless the United States and the world as a whole took concerted action to mitigate the risk posed by climate change.

Asked if investors from many countries had taken part in the work on the action plan, Mr. MacDonald said that, in addition to investors from the United States, some 44 European organizations, including pension funds, made up an institutional investors’ group on climate change.  Support was also provided by an investor group covering Australia and New Zealand, as well as Japanese non-governmental organizations and investors.  In fact, the action plan would be of interest to people all over the world.

Risks from climate change across every market sector were just starting to be looked at, Ms. Lubber said in response to several other questions.  By not acting on climate, the world faced the kind of fears that had become obvious with the sub-prime mortgage problem.  The good news today was that more and more companies spoke about climate change and took some steps in that regard.  The bad news was that those steps were still relatively small, compared with what they could be doing.

Asked if the companies were moving in response to the investors’ concerns, she said that, during the previous summit two and a half years ago, nobody could have anticipated the CitiGroup putting forward a $50 billion climate programme and changing its due diligence procedures for a review of coal power plants.  The Bank of America had recently announced that it would put a cost on carbon in the terms of their loans.  Those were huge changes that could be largely attributed to the questions posed by institutional investors.

Asked if the United Nations Global Compact should require carbon emissions disclosure, she said that the Global Compact worked closely with the Global Reporting Initiative, the international gold standard for corporate reporting, and was increasingly asking for disclosure from the companies it worked with.

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For information media • not an official record