Institutional investor coalition calls on governments for climate-change policies

Coalition represents $24 trillion — including CalPERS, CalSTRS and BlackRock

A group of 347 global asset owners and other institutional investors representing $24 trillion in assets — including CalPERS, CalSTRS, BT Pension Scheme and BlackRock (BLK) — called on government leaders worldwide to phase out subsidies for fossil fuels and move to carbon pricing to facilitate redirecting investment toward a green energy economy to meet challenges from climate change, leaders of the coalition said Thursday on a teleconference.

“These institutions are calling in their fiduciary duty … to say it's not just the planet at risk here; it's people's savings and pensions … if we don't take action,” David Pitt-Watson, chairman, U.N. Environment Programme Finance Initiative, and senior strategic adviser at Inflection Point Capital Management, said at the teleconference.

“Governments need to act now if we are going to solve this problem,” Mr. Pitt-Watson said. “We need stable meaningful prices on carbon. We need an elimination of subsidies on carbon … and we need to regulate the finance industry so it can do its proper job, which is to take our savings and invest them profitably in development that is sustainable.”

“This is a mainstream group” made up of some of the biggest asset owners and investment management companies worldwide, “representing in their fiduciary duty hundreds of millions of people (and is) really pressing the world leaders to take action,” Mr. Pitt-Watson said.

Anne Simpson, senior portfolio manager and director of global governance at the $298 billion California Public Employees' Retirement System, Sacramento, said at the teleconference, “There is a market failure that needs to be addressed. That is carbon is not priced and subsidies (to fossil-fuel companies) are distorting investment decisions.”

Investors pursuing sustainable investment need to “get the market to work with us rather than against us,” Ms. Simpson said. “And that's where the question of carbon pricing comes in. If we don't get the market incentives aligned with our fiduciary responsibility, we won't (move enough to) the investment that is needed in new … opportunities” related to clean energy.

Without a change, the world faces a “potential environmental disaster” from carbon emissions, Ms. Simpson said.

“What we're saying as a group in this call today is this is also an investment disaster,” Ms. Simpson said. “We cannot invest for the long term to meet our obligation as a fiduciary unless we have stable financial markets and those in turn rest upon solving climate risk.”

Institutional investors “need to price risk properly,” Ms. Simpson said. “We need governments and policymakers to step up and do their part. This is a public-private stakeholder challenge and we need to work together.”

Donald MacDonald, trustee director of the £40 billion ($65.5 billion) BT Pension Scheme, London, said, “We really do need more investible opportunities, because there is actually more money available … than there are … investible opportunities.”

The group released a statement, signed by all the members of the group, about how asset owners and institutional investors can contribute to mitigating climate change.

“We are particularly concerned that gaps, weaknesses and delays in climate change and clean-energy policies will increase the risks to our investments as a result of the physical impacts of climate change, and will increase the likelihood that more radical policy measures will be required to reduce greenhouse gas emissions,” the statement said. “In turn, this could jeopardize the investments and retirement savings of millions of citizens.”

Signatories include CalPERS, the $186.6 billion California State Teachers' Retirement System, West Sacramento, and BT.

Representatives of the group plan to present its plans at the United Nations climate summit on Sept. 23.

The group also Thursday released a report — “Financial Institutions Taking Action on Climate Change” — supported by the World Bank Group and the United Nations Environment Programme, on leadership and action of institutional investors to promote low-carbon investments.