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May 28, 2013
Effective Policy Will Drive Investment in Energy Efficiency
    by Robert Kropp

A report from Ceres and the Investor Network on Climate Risk calls for policies that will encourage institutional investors to invest in energy efficiency projects.

No less an authority than the International Energy Agency (IEA) has identified energy efficiency as an essential component in the battle against the worst effects of climate change. To avoid those effects, the IEA states, one-third of emissions reductions will have to be accomplished through efficiency measures.

In 2009, before the Waxman-Markey climate change bill died in the US Senate, the American Council for an Energy-Efficient Economy (ACEEE) estimated that investments in energy efficiency could provide up to one-half of necessary greenhouse gas (GHG) emissions reductions by 2050, and cost savings of about $2 trillion by 2050.

It has been almost four years since the Senate failed to pass comprehensive climate change legislation that would have helped attain the goals outlined by ACEEE, and institutional investors are still waiting for policies and regulations that will encourage the scale of investment necessary to realize those goals. In anew report, Ceres and its Investor Network on Climate Risk (INCR) urge policymakers to "play an essential role in overcoming the present barriers that limit large-scale investment in energy efficiency."

Institutional investors are well aware of the potential impact to their portfolios of climate change. An oft-cited 2011 report from Mercer warned that the economic cost of climate policy could lead to as much as a 10% increase in portfolio risk in the next 20 years.

The report from Ceres and INCR states, "Energy efficiency can make institutional investors' existing investments more profitable, improve the corporate bottom line, present new profitable investment opportunities, and offer the fastest, easiest and cheapest way to significantly reduce greenhouse gas emissions and advance corporate sustainability goals."

"However," the report continues, "Perhaps the most appealing energy efficiency investment opportunity—the ability to finance energy efficiency retrofit loans through a secondary market—is not yet available."

In order to "catalyze the development of secondary markets for energy efficiency retrofit loans and thus attract investment from institutional investors," the report provides the following recommendations:
• Develop regulations for electric utilities that will "eliminate disincentives" and "support energy efficiency financing through equal treatment of efficiency loans with electricity sales and information sharing between financers and utilities";
• Establish polices that will "drive demand for energy efficiency retrofits, including appliance and equipment efficiency standards, building codes and standards, and building energy disclosure requirements"; and
• Enable "innovative financing tools" to "help overcome the initial cost barrier that many individuals and institutions face as they consider an energy efficiency retrofit."

"Policymakers and regulators should work to unlock capital from institutional investors for energy efficiency by promoting the policies identified in this report," Mindy Lubber, president of Ceres and director of INCR, said. "Many of these policies do not require public funds, and they can put money back into the pockets of homeowners and business leaders around the country."

A webinar has been scheduled for June 6th at which an overview of the findings of the report will be provided.


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