Huge global institutional investors with more than $24 trillion are turning to climate action for their earnings. They want green and they want it now. They’re backed by the growing green and climate bonds market. Meanwhile the coal industry is desperately trying to woo church groups to stop the divestment movement from coal fossil fuels.
If the Australian government doesn’t get it on climate, the people with real skin the game, huge institutional investors, do.
The United Nations talks on climate got under way this week in New York. They will commence without the prime minister Tony Abbott in attendance, which is probably a good thing because, as The Greens pointed out, he would make Australia look an even bigger pariah on climate than it is now.
But they will include foreign minister Julie Bishop who will advocate for growth ahead of climate, and would better serve the world’s hopes for the planet if she also stayed home.
Making a noise bigger noise than both of these negatives combined will be the some of the world’s biggest investors with more than US$24 trillion dollars of investments under their belt who are saying they want climate action, they want it now and they want it because it’s good for their business.
Go the greenback!
Here’s just a sample of the 350 institutional investors involved:
BlackRock, CalPERS, PensionDanmark, Deutsche, South African GEPF, Australian CFSGAM, Cathay Financial Holdings.
Here’s some highlights of what they’re thinking:
Danish pension fund PKA is looking to increase its new and existing offshore wind farm investments to €1.5 billion by the end of 2015.
US insurer and pension fund provider TIAA-CREFF reduced the carbon footprint of its real estate portfolio by 17 per cent, cutting 58,000 metric tons of greenhouse gas emissions.
Swedish pension fund AP4 is committed to decarbonising its entire $20 billion listed equities portfolio.
China Utility-Based Energy Efficiency Finance Program provides loans worth $790 million, financing 226 projects and reducing emissions by 19 million metric tons of carbon.
ASN Bank in the Netherlands to become fully carbon-neutral by 2030.
Zurich Insurance Group to invest up to $2 billion in green bonds, one of many ?commitments this year that has resulted in 20-fold growth in green bond market since 2012.
HSBC Armenia partners with IFC to finance nine small-medium size enterprise energy efficiency projects in Armenia, totaling approximately $25 million and reducing carbon emissions by more than 6600 tons a year.
Global bank ING has in seven years reduced its energy project loan allocation to coal power from 63 per cent to 13 per cent and increased its allocation to renewable energies from five to 39 per cent.
There’s a database – click here
The investor groups have launched a public online database of select low carbon investments made by asset owners such as pension funds and insurance companies, a media statement issued by the group said.
“The Low Carbon Investment Registry shows how investors are already supporting the transition to a low carbon economy by investing in a variety of different ways – directly into renewable energy projects, into clean energy funds, through green bonds and through the establishment of public-private-partnerships,” according to Nathan Fabian, chief executive of the Investor Group on Climate Change.
“It gives policymakers a better understanding of how private capital is currently flowing into low carbon investments.”
As investor appetite for green and clean investments grow so do Green Bonds and Climate Bonds. Already more than US$25 billion of Green Bonds have been issued this year and the Climate Bonds Initiative expects a total of over US$40 billion for the year and US$100 billion in 2015.
Climate Bonds chief executive Sean Kidney said: “Enormous opportunity exists to develop green bond financing in the coming year, including working with organisations making commitments in other workstreams of the UN Summit – cities, low-carbon transport, clean energy. That applies to emerging as well as developed markets.
“The response to climate change also requires substantial investments in areas such as water infrastructure; adaptation measures for communities; and the climate-proofing of existing infrastructure. It requires a rapid transition to a low-carbon and climate resilient economy. The scale of the task requires mobilizing trillions of dollars of private sector capital as well as public expenditure.”
Tushar Morzaria, group finance director, Barclays Bank, said: “Every so often, market innovation and social imperatives come together to create something exciting that has the potential to make a real difference. The Green Bond market is a fast-growing and powerful example of this synthesis.”
Erik Jan van Bergen, chief investment office, ACTIAM said, “Gigantic investments are needed. These amounts are investments yielding a return, they are not costs. To provide the necessary capital, we need to activate the world’s large debt capital markets. Green bonds and climate bonds are a means to do so.
“We stand ready to invest. ACTIAM intends to further increase its climate bond holdings of EUR 500 million, subject to market conditions and client demand, to EUR 1 billion by the end of 2015 ”
Here’s some more detail on what investors are doing in the Green Bond space:
Agence France de Developpement (AfD) – Pierre Forestier, Head of Climate Division
The French development bank AfD has just issued its first EUR 1 billion Climate Bond, funding existing or future climate oriented projects in developing countries. AfD intends to be a regular issuer into this market.
Aviva Investors – Dr Steve Waygood, Chief Responsible Investment Officer
Aviva, with USD 401 billion of assets under management, are a major purchaser of green bonds and are committed to growing their portfolio in 2015.
Dr Steve Waygood: “Investors and policy makers need to work on a capital raising plan so that global governments and central banks know how they are going to raise the clean trillion in an efficient and effective way.”
Barclays Bank – Jeremy Wilson, Vice Chairman, Corporate Banking
Barclays Treasury has current green bond holdings of US$700 million. It announced this week that it plans to increase its holdings to US$1.63 billion by November 2015 to form part of its liquid asset buffer. This will be by far the largest such investment by a bank.
GDF SUEZ – Mr Gérard Mestrallet, CEO
Global utility GDF SUEZ has issued the world’s largest single green bond to date, of US$3.5 billion. It has announced that it plans further major issuance once the funds it has just raised are totally used. It should be rapid given GDF SUEZ growth strategy in renewables and energy efficiency.
Overseas Private Investor Corporation – Ms Elizabeth L. Littlefield, President and CEO
OPIC is today issuing its first “Green Guaranties”, US government-guaranteed certificates of participation that adhere to the Green Bond Principles. Proceeds of $47 million will go to the construction of the Luz del Norte solar project in Chile – the largest photovoltaic project in Latin America.
They’ll fight divestment in the trenches
But while all this good news emerges on one side of the climate divide, Anglo American chief executive Mark Cutifani is trying to woo conservative church groups to fight the coal divestment and green investment campaigns.
Mr Cutifani said the divestment movement was “short-sighted” and “unfortunately very vocal”, Fairfax Media reported this week.
“I think we have a big job to do,” he said. “I don’t think we are doing enough and we have got to reach out more effectively.
“Anglo American, and other partners in the industry, we’re starting a series of dialogues with local communities, in particular the broad faith-based groups, because they’ve got such an extensive reach across the globe. We are trying to sit with them to explain the industry fundamentals … and the unintended consequences on the world and the poor, and the globe itself, on taking such short-sighted, uninformed views on these things.”
- See the full story here
But it could be too late for the coal industry. Global church groups see that conserving the earth and ridding it of pollution is more their speed.
See our article here. Divestment: time to align our money with our values, world’s religious groups say.
Meanwhile a new superannuation fund has been launched and within week snared $15 million worth of investment and financial groups such as Bendigo and Adelaide Bank, AMP Capital, UniSuper, HESTA, bankmecu, Credit Union Australia, Beyond Bank and Defence Bank are also doing the big green switch.
- See our article Here comes fossil free super, Future Super