However, as Ole Beier
Sørensen, Chairman of the Institutional Investor
Group on Climate Change (IIGCC), observed, "Investors operate under fiduciary duties to their
clients and their beneficiaries. They will only be able to invest in climate-relevant assets and
scale up their efforts if these offer risk-adjusted returns."
An imperative of private
investment support for the transition to a low-carbon economy is the presence of strong and stable
policy frameworks. But as the recently published annual World Energy Outlook of the International Energy Agency (IEA) points out, the
current policy frameworks of most governments achieve the opposite effect.
encourage wasteful consumption of fossil fuels jumped to over $400 billion" in 2010, the report
reveals, while despite the lingering global recession primary energy demand increased by five
percent and greenhouse gas (GHG) emissions reached an all-time high.
have concluded that the global temperature increase must be kept below 2°C, or 450 parts per
million of CO2 in the atmosphere, to prevent the effects of climate change from becoming
irreversible and even multiplying. Is this goal achievable? According to IEA, it is increasingly
unlikely. According to the report's 450 Scenario, four-fifths of emissions permissible by 2035 are
locked in place already; if governments do not act decisively, all the permissible emissions under
the scenario will have been reached by 2017.
The report offers two other scenarios as
well. Under the New Policies Scenario, in which recent policy commitments are cautiously
implemented, global temperatures will rise by 3.5°C. Under the business-as-usual Current Policies
Scenario, global temperatures will rise by 6°C.
The last time global temperatures rose by
6°C was at the end of the Permian period, which occurred about 250 million years ago. The event led
to the extinction of 95% of the planet's species, according to Mark Lynas, the author of Six
Degrees: Our Future on a Hotter Planet.
"Delaying action is a false economy," the report
warns. "For every $1 of investment avoided in the power sector before 2020 an additional $4.3 would
need to be spent after 2020 to compensate for the increased emissions."
IEA concluded its
Outlook on a cautiously optimistic note, observing that the United Nations has designated 2012 as
the International Year of
Sustainable Energy for All. However, it appears that world governments are again failing to
live up to their responsibilities, especially to future generations; many now seem to think that an
international binding agreement is feasible by 2020.
Such a timeline would be too late to
keep global temperature increases below 2°C, according to Fatih Birol, chief economist at IEA.
Birol emphasized that needed changes in investment patterns would not occur without international