Pension industry organizations fighting for greener investment strategies are taking their campaign to the United Nations Climate Change Conference in Copenhagen next month.
The Institutional Investors Group on Climate Change, the Investor Network on Climate Risk and the P8 Group — which is backed by Britain's Prince Charles — are among those proposing a series of initiatives aimed at putting a more earth-friendly face on pension investment portfolios.
“Copenhagen is key for getting the framework right,” said Aled Jones, deputy director of the University of Cambridge Program for Sustainability Leadership, which together with The Prince of Wales' Business and Environment Program, in 2007 launched the P8 initiative — a reference to the G8 group of countries, though there are more than eight funds in the pension fund group.
Based in London, the P8 Group comprises top global pension funds such as: the €180 billion ($264 billion) Stichting Pensioenfonds ABP, Heerlen, Netherlands; the $201 billion California Public Employees' Retirement System, Sacramento; the $130.3 billion California State Teachers' Retirement System, West Sacramento; and the £26.8 billion ($44.7 billion) Universities Superannuation Scheme, Liverpool, England. Overall, pension funds in the P8 have about $3 trillion in assets. According to a report published in October by the United Nations Environment Program with support from the P8 Group, pension funds globally have an aggregate $12 trillion in assets and sovereign wealth funds control another $3.75 trillion.
While the proposals vary among organizations, they have several similar goals, which include:
• increasing government support for technologies that promote energy efficiency, including more funding for early stage projects;
• developing measures toward an effective global carbon market, including efficient allocation of allowances and consistency among various carbon markets; and
• encouraging private-sector investments, for example, by shifting more investment risks associated with low-carbon project developments to the public sector. The support is not necessarily financial and can include regulatory measures to attract investments.
Stephanie Pfeifer, program director at the London-based Institutional Investors Group on Climate Change, said another goal is to encourage governments around the world to set a worldwide target for emissions reduction. The IIGCC — an organization established in 2001 to promote collaboration between pension funds and money managers over climate change — is proposing that developed nations reduce their emissions by 25% to 40% by 2020 and 80% to 95% by 2050.
“The targets for developed countries will only be credible if backed up by clear national action plans,” according to an investor statement prepared by the group — along with the group's Boston-based equivalent, the Investor Network on Climate Risk, and others — to be submitted for consideration at the Copenhagen conference.