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May 21, 2008
Will 2008 Be the Year Congress Acts on Climate Change?
    by Anne Moore Odell

Institutional investors send a message to Congress that action on climate change policy is a business imperative.


In a strongly worded letter, a group of large investors managing $2.3 trillion in assets asked the US Senate to create federal legislation to limit the pollution that leads to climate change. Lead by Ceres, a coalition of investors, environmental groups, and other organizations working with companies to address sustainability, and the Investor Network on Climate Risk (INCR), the institutional investors called for policies mandating reductions in greenhouse gases to 60% to 90% below 1990 levels by 2050.

At the beginning of next month, the Senate will start its debate on the Lieberman-Warner Climate Bill, which mandates reductions in polluting gases similar to the investors' request. These reduction targets mirror the reductions suggested in the 2007 report from the Intergovernmental Panel on Climate Change (IPCC) that call for a reduction of 25-40% below 1990 levels by 2020 and 80-95% below 1990 levels by 2050.

"It's time for Congress to step up to the plate and tackle climate change. Any further delay is inexcusable," said Randall Edwards, Oregon State Treasurer, in the press conference releasing the letter. "The Lieberman-Warner bill would give investors like me the ability to see the risks involved so we can begin rebuilding our economy by investing in green technologies."

The 52 signers of the letter addressed to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell are comprised of state treasurers and controllers, institutional investors, and asset managers. These investors include the California Public Employees' Retirement System (CalPERS), Deutsche Asset Management, F&C Asset Management, the Man Group (the world's largest hedge fund), and treasurers and controllers for California, Connecticut, Maryland, New York City, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, and Vermont.

Companies operating in the US face a patchwork of local, state, and international regulations on greenhouse gas emissions. However, without a clear federal policy regarding greenhouse gases, the investors think that long-term competitiveness will be damaged as companies will not make the necessary capital investments to stay competitive on the global market.

The letter outlines three steps the coalition would like the federal government to take. First, the Ceres lead investors would like a mandatory national policy to reduce greenhouse gases. Secondly, they call for a national movement and realignment of incentives to reach these climate goals. Last, the investors ask the Securities and Exchange Commission (SEC) to strengthen companies' disclosure of material climate risks.

"Left unattended, risks from severe weather, extended droughts, sea-level rise, and other effects of climate change will worsen over time as discussed in last year's IPCC report, harming company assets, global investment portfolios, ecosystems, and human lives," the letter reads. "While there are costs involved in mitigating greenhouse gas emissions, U.S. government inaction is costlier. Emissions reductions can be planned, the costs phased in over time and consequent inequities addressed, but in the midst of an extreme weather event or a drought, such planning and foresight are impossible."

The investors also point to the opportunities created by the movement to a lower carbon economy. Federal policies and climate regulation would help create large new investments in clean technology and other climate change solutions such as renewable energy.

The uncertainty around climate change and the companies' lack of clear disclosure regulations is getting in the way of investors having the information available to make well informed decisions. This lack of climate change information is especially difficult for institutional investors who act in the interests of millions of working Americans, investing for retirement and in support of state programs.

"Investors are left on the sidelines, " said Mindy Lubber, president of Ceres and director of INCR. "Action on climate change is better for the economy. The most expensive thing we can do now is not to act."

"Enacting climate policy legislation and enforcing climate-related information disclosure by businesses protects both our environment and our bottom line," said Pennsylvania Treasurer Robin L. Wiessmann, whose office oversees $122 billion in assets. "The actions we call for today will create new investment opportunities in the clean technology sector and allow investors to thoroughly assess the opportunities and risks associated with the companies they do business with."

This year's letter follows a similar letter sent to Congress in 2007, imploring it to address climate change regulation and disclosure.

 

 
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