Citing potential climate-related GDP losses of up to 20 percent by 2050 and the economic benefits of shifting to low-carbon and resource-efficient economies, investors released a major statement today calling for national and international policies that will spur private investment into low-carbon technologies.
The statement was signed by 259 investors from North America, Europe, Asia, Australia, Latin America and Africa with collective assets totaling more than $15 trillion—more than one-quarter of global capitalization. Signatories included Allianz, HSBC, APG and a dozen U.S. public pension funds and state treasurers. It is the largest-ever group of investors to call for government action on climate change.
Institutional investors don't line up behind public policy changes unless there's money to be made. There are probably several hidden agendas at work here. Carbon credit trading is a potentially a huge new market in derivatives for global investment banks. Any expansion of the physical market for carbon capture and carbon control technologies will mean more market participants in the bid-ask spread on carbon credits.
Don't forget the importance of infrastructure investing to market makers. The more national governments spend on infrastructure to lower national carbon production, the more creative financing they'll need. Pushing $100mm blocks of Build America Bonds would make any underwriters' day. Ceres should be careful what it wishes for, as some low-carbon investments can easily become boondoggles. Take this U.S. Department of Energy loan to an unproven company that purports to develop a natural gas powered van for wheelchair users. Only Uncle Sam would be dumb enough to give a loan to a startup and not ask for a convertible feature that turns it into equity.
Go green. Collect the green (money). Nice business model.