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February 20, 2008
Institutional Investors Plan Long-term for Climate Change
    by Anne Moore Odell

Summit at the UN unveils an action plan for addressing climate change risks and opportunities.


Almost 500 institutional investment power players attended the Investor Summit on Climate Risk held at the United Nations last week on February 14, 2008. The summit was sponsored by Ceres, a US coalition of investor and environmental groups, and the United Nations Foundation. Assets managed by those at the conference equaled more than $20 trillion.

The Investor Network on Climate Risk Action Plan was presented at summit with 50 institutional investor signatories who have agreed to increase investments in clean energy technologies and energy efficiency. The Action Plan also calls for examining investments for long-term carbon risks. Signatories include state treasurers, asset managers, and foundations with over $1.75 trillion in assets under management. Ceres directs the Investor Network on Climate Risk (INCR).

"Investors and Wall Street firms need to be part of the solution to climate change and, judging from the nearly 500 financial leaders attending the all-day climate summit, they want to be part of the solution," said Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk.

Stephen A. Foster, President & CEO of the Overbrook Foundation, a signatory of the action plan, attended the summit and was impressed by the collective value of the assets represented and by Vice President Al Gore who spoke. "I think the action plan is very important for providing a pathway for investors who are looking for direction in moving toward sustainable investment practices," said Foster. "We will continue to look for sustainable investments for our own portfolio while encouraging others to adopt the same approaches to investing."

Orin S. Kramer, Chair of the New Jersey State Investment Council, who attended the summit with investment director William Clark, was also impressed by Al Gore. "Gore lit up the room," said Kramer. " I was struck by the breadth of the commitment, both in terms of the commitment to sustainable investments, investing in alternative energy and also to holding companies accountable," added Kramer.

Over the next two years, $10 billion in investments in clean technology prospects was pledged by the signers of the action plan. Along with this substantial investment in clean tech, investors vowed to include green building standards in their investments.

The 2008 Action Plan shows how institutional investors have gone from just talking about climate change to actually creating concrete plans to work on climate change in both the short and long term. The Action Plan lists a nine-prong agenda for the institutional investors.

The signatories will require asset managers and others to consider climate change risks and opportunities. Furthermore, investors vow to put money into developing and deploying clean tech across all asset classes. The investors also are working to increase the energy efficiency of real estate portfolios and investments, aiming for a 20% reduction in energy usage over the next three years.

Investors are planning to work with companies and other investors as part of the Action Plan, urging companies to make climate change a governance priority and to work on corporate disclosure. This includes signatories supporting shareholder resolutions to reduce greenhouse gas emissions and energy usage.

"I think one of the most important parts of the Action Plan is that it involves not just the investors but also the Wall Street analysts and companies. It is calling on the entire investment community to make real changes and to have a real impact on climate change," said Elizabeth Levy, Senior Environmental Research Analyst at Winslow Management, a signatory of the Action Plan.

The Action Plan supports working with the Federal government to address climate change. The signatories will continue to work with the Securities and Exchange Commission (SEC) and members of Congress to require companies to disclose climate change risks. They also plan to work on national policies on climate change. Lastly, the Action Plan calls for supporting policies that maximize energy efficiency.

A new McKinsey Global Institute (MGI) report launched at the summit suggests that investments in energy productivity could earn high rates for investors. By working on increasing output of consumed energy, the report says that energy growth demand could be cut in half.

"Energy efficiency provides the biggest opportunity for helping developed and developing countries alike," said Timothy Wirth, president of the United Nations Foundation. "Investors have a critical role in helping drive this new energy economy forward. Their commitments here today are groundbreaking and will not only reduce the devastating impacts of climate change, but will help grow the global economy at the same time."

Signatories of the Action Plan call for more asset managers, state treasurers, and foundations to step up and sign on. Even though less than a tenth of the assets under management at the Summit ($1.75 trillion out of $20 trillion) are actually signatories of the plan, European investors managing $6.5 trillion support the plan in principle, as well. Perhaps most importantly though, the Summit helped spread the word loud and clear about climate change risks and responsibilities. The environmentally conscious institutional investors, lead largely by state treasurers, are helping forge a new climate friendly frontier.



 

 
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