In January 2014, non-profit organisation Ceres released a landmark report, Investing in the Clean Trillion, calling on institutional investors to help fund the additional $1 trillion a year needed to 2050 to help stop climate change. A year later, we caught up with vice-president of climate and energy programmes Sue Reid to find out how the report has impact the institutional investment community and discuss what other initiatives Ceres has planned for this year.
What originally motivated the Investing in the Clean Trillion report?
The report came out of a number of factors, including the International Energy Agency’s analysis on what needs to be done to limit global temperature rise to no more than 2 degrees Celsius. What it showed is that we need to ramp up clean energy investment exponentially – specifically, by an additional $1 trillion each year between now and 2050. We’re only at about $310 billion a year now, so we’ve got a lot of work in front of us.
We focused on the clean $1 trillion, which is both about the clean energy opportunity and the need to substantially reduce fossil fuel investments and transfer them into clean energy. We have a Carbon Asset Risk Initiative focused on ratcheting down fossil fuel capital expenditures, which, disturbingly, amounts to more than half a trillion dollars a year.
A year later, how do you measure the report’s impact?
There’s no singular metric or key performance indicator, but it’s all of these pieces together that seem to be yielding positive results. There has been a major educational outreach effort over the last year, especially in regard to educating pension funds and insurance companies on these issues, and there are clear changes in terms of the amount of dollars flowing into clean energy. Last year’s $310 billion figure tracked by Bloomberg New Energy Finance, for example, was a 16 percent jump from 2013.
We’re also working with investors to advocate publicly for strong climate policies worldwide, which will also stimulate clean energy investments. Last September, 350 major investors who collectively manage $24 trillion of assets issued a global statement calling for carbon pricing and an international climate agreement.
At the same time, Ceres is mobilising the business community on these issues through its Climate Declaration, which has been signed by more than 1,200 companies. Among the companies signing are iconic brands like General Motors, Nike, Intel and Apple. Having said that, last year’s $310 billion figure shows how far we are from achieving our Clean Trillion objectives, including a short-term goal of $500 billion additional investment a year by 2020.
You call for a 5 percent across the board allocation to clean energy. How feasible is that?
The 5 percent target is more directional and to give a sense of the kind of scale we are talking about – as opposed to suggesting every single institutional investor should allocate 5 percent of their portfolio to clean energy. We think there are considerable advantages to moving in that direction and in recent months we’ve seen major public pension funds, such as CalSTRS, do just that. At the same time, we recognise investors are looking for the same kind of risk/reward profiles and same rates of return they see from conventional investments.
We won’t get to the scale of clean energy investment we need through goodwill and philanthropic investments alone. Thankfully we have moved in that direction, so it is now becoming easier to invest in clean energy as reliably as other investments – in fact, with increasingly less risk and volatility than traditional energy investments.
Over the next five years, we think it is both feasible and likely that many institutional investors will invest in the order of 5 percent of their assets in clean energy solutions across their portfolios.
This is an abridged version of an interview first published in our digital sister publication www.lowcarbonenergyinvestor.com.