Wanted: major investors to spend 'clean trillion' on climate

NEW YORK Wed Jan 15, 2014 11:24am EST

NEW YORK Jan 15 (Reuters) - Major institutional investors will need to ratchet up their investment in clean energy to achieve the massive funding goals necessary to avert catastrophic climate change, according to a report released on Wednesday by investment group Ceres.

Ceres, a non-profit organization which advocates for the adoption of "sustainable business practices," made seven recommendations for the private sector and three for governments on how to bridge the gap between today's clean energy investment levels and the $1 trillion per year target estimated in 2013 by the International Energy Agency.

Ceres said reaching the so-called "clean trillion" will require the financial firepower of deep-pocketed institutional investors, such as pension funds and sovereign wealth funds, who manage around $75.9 trillion globally.

"Today's leading providers of capital to clean energy are primarily commercial banks, national and multilateral development banks and electric utilities. But these sources alone are insufficient to double annual global clean energy investment by 2020 and quadruple it by 2030," the report said.

Separately, a report by Bloomberg New Energy Finance published on Wednesday found that global investment in clean energy fell for the second consecutive year in 2013, to $254 billion from $281 billion in 2012.

The Ceres report was released as investors met in New York for a conference on climate risk.

Mark Fulton, author of the Ceres report and former head of research for Deutsche Bank Climate Change Advisors, said the recommendations are focused mainly on what the markets can do to increase the amount of investment.

For institutional investors, Ceres recommends measures that would scale up clean energy investment.

One suggestion by Ceres called for institutional investors to set firm goals - for example, to allocate 5 percent of their portfolios to clean energy investment.

That approach would "give investors the best chance of capitalizing on new clean energy-related opportunities across all asset classes  as opposed to relegating this clean energy theme to just public equity or venture capital," Ceres said.

The report also advised investors to work with energy companies to disclose the portfolio risk of their carbon-intensive oil, gas and coal reserves becoming "stranded assets" - unusable because of new regulations or market forces.

The report suggested that investors expand the current $2.5 trillion covered bond market for clean energy investment, which would "broaden the universe of highly-rated fixed-income products attached to clean energy."