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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Half the cuts in greenhouse gas emissions required to make the world safe can be achieved at a net profit to the global economy
By Finfacts Team
Feb 18, 2008 - 9:29:12 AM

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The US Department of Energy says that the United States uses a lot of energy—nearly a million dollars worth each minute, 24 hours a day, every day of the year. With less than 5% of the world’s population, Americans consume about one fourth of the world’s energy resources. The US is not alone among industrialized nations; 16% of the world’s population consumes 80% of its natural resources. The average American consumes six times more energy than the world average. The industrial sector, which accounts for about 10% of the US economy, consumes one-third of the nation’s total energy demand.

Information and communications technologies have helped the economy achieve greater levels of productivity without increasing overall levels of energy consumption, according to a new report, published in February 2008.

The report found that ICT has helped to reduce energy waste and improve efficiency because of breakthroughs in products such as sensors, microprocessors and virtualization. Energy efficiency gains jumped greatly since 1996: U.S. energy intensity declined 1.8% per year between 1970 and 1995, but after 1996, the rate dropped by 2.4%.

Producing a dollar of economic output takes half as much energy now as it did in 1970, the report found. Economic output expanded by nearly 65% since 1990, compared to a 23% growth in energy and power resources demand.

Nearly 50 leading US and European institutional investors managing over $1.75 trillion in assets last week released a climate change action plan at the United Nations, that will boost investments in energy efficiency and clean energy technologies and require tougher scrutiny of carbon-intensive investments that may pose long-term financial risks. Additionally, European investors managing $6.5 trillion in assets supported the action plan"in principle."

Half the cuts in greenhouse gas emissions needed to make the world safe can be achieved at a net profit to the global economy, a separate study has found. McKinsey, the consultancy, published a report at the UN conference, concluding that investment in energy efficiency of about $170bn a year worldwide, would yield a profit of about 17 per cent, or $29bn.

The action climate change action plan was announced at the Investor Summit on Climate Risk, hosted by Ceres, a US coalition of investor and environmental leaders, and the United Nations Foundation, attended by more than 450 investor, financial and corporate leaders from around the world. Signatories to the action plan include state treasurers, controllers, pension fund leaders, asset managers and foundations from London, California, Florida, New York, Connecticut, North Carolina, Pennsylvania and a dozen other states.

"Our goal is to transform the world economy into one that is clean, green and sustainable," said California State Treasurer Bill Lockyer, one of the 49 signatories, who serves on the board of the leading pension funds, CalPERS and CalSTRS, which collectively manage more than $500 billion in assets. "California's public pension funds have already committed over $800 million to this effort through investments in environmental technology. And they are actively pressing the corporate world to fully assess and disclose the risks and opportunities climate change presents for their business operations."

"With today’s action plan, investors are advancing the need for closer scrutiny of investments to include the financial risks of climate change, while also harnessing emerging opportunities," said Florida Chief Financial Officer Alex Sink. "Florida is on board as the first State Treasury in the nation to require fund managers to disclose how they incorporate climate risk into prudent investment management."

Noting that climate change presents both material risks and significant opportunities, the investors pledged to collectively invest $10 billion in clean technology opportunities over the next two years and to incorporate green building standards — such as LEED (Leadership in Energy Efficiency and Design) and Energy Star — into their investment decisions.  Calling energy efficiency "one of the fastest, easiest and cheapest ways to significantly reduce emissions and improve the bottom line," the investor group pledged to reduce energy use in core real estate holdings by 20 percent over the next three years.

The McKinsey Global Institute (MGI) report, concludes that major investments over the next decade in energy productivity — the level of output achieved from the energy consumed — could earn double-digit rates of return for investors. Such investments would cut global energy demand growth by at least half and achieve up to half of the reductions of greenhouse gas emissions that experts say is required to prevent the world's mean temperature from increasing by more than 2 degrees centigrade.

The action plan calls for a series of specific steps by investors to address the growing risks and opportunities from climate change. The nine goals include policy actions aimed at the Securities and Exchange Commission (SEC) and Congress, engagement with companies to improve their disclosure and responses to climate change, minimizing climate investment risks and maximizing climate-related investment opportunities. Among the investor commitments:

  • Support clean technology, with a goal of deploying $10 billion collectively over the next two years.

  • Aim for a 20 percent reduction in energy used in core real estate investment holdings over a three-year period, and consider green building standards in making investment decisions.

  • Require and validate that investment managers, investment consultants and advisors report on how they are assessing climate risks in their portfolios, whether from new carbon-reducing regulations, physical impacts or competitive risks.

  • Encourage Wall Street analysts, rating agencies and investment banks to analyze and report on the potential impacts of foreseeable long-term carbon costs, in the range of $20 to $40 per metric ton of CO2, particularly on carbon-intensive investments such as new coal-fired power plants, oil shale, tar sands and coal-to-liquid projects.

  • Push the SEC to issue guidance leading to full corporate disclosure of climate risks and opportunities.

  • Push Congress for a mandatory national policy to reduce national greenhouse gas emissions in accordance with the 60-90 percent reductions below 1990 levels by 2050 that scientists suggest is urgently needed to avoid the worst and most costly impacts from climate change.

Source: US Department of Energy

"This action plan reflects the many investment opportunities that exist today to put a dent in global warming pollution, build profits and benefit the global economy," said Mindy S. Lubber, president of the Ceres investor coalition and director of the Investor Network on Climate Risk. "Leveraging the vast energy efficiency opportunities at home and abroad holds especially great promise for investors."

"Energy efficiency provides the biggest opportunity for helping developed and developing countries alike," said Timothy Wirth, president of the United Nations Foundation. "Investors have a critical role in helping drive this new energy economy forward. Their commitments here today are groundbreaking and will not only reduce the devastating impacts of climate change but will help grow the global economy at the same time."

In the last two years, investor and asset manager participation in the Investor Network on Climate Risk has more than doubled, to more than 60 institutional investors and with collective assets totaling $4.5 trillion. At today's summit, Deutsche Asset Management, which manages over $800 billion in assets, announced it was joining INCR, increasing INCR's total member assets to over $5 trillion.

 Finfacts Climate Change Reports Page

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