Written by: Timothy Gardner, Planet Ark
US and British institutional investors who collectively manage over $3 trillion in assets pledged on Tuesday to invest $1 billion in clean energy companies in an effort to reduce risks posed by climate change.
Steve Westly, controller of California, told reporters the money could be invested in anything from wind power to more efficient turbines at power plants to auto makers, such as Toyota, that make hybrid cars.
"Our job is to encourage companies to think green. We want it to happen before it's too late," said Westly.
"The real answer is diversification in energy," he said during a day-long conference at the UN headquarters of US state treasurers, financiers and major investors on how to deal with the financial risk of climate change.
Institutional investors, including state treasurers from Connecticut and California, labor pension funds, and British pension funds, pledged to make the investment at the Institutional Investor Summit on Climate Risk.
The institutions have already pledged to invest $450 million in clean energy technologies and the $1 billion includes that previous pledge.
But Westly and other investors said the combination of oil prices trading at over $50 a barrel and growing concerns about possible future US regulations on carbon emissions make it a good time to invest in clean energy and that investments could soon well exceed Tuesday's pledge.
US President George W. Bush withdrew from the international Kyoto Protocol, which seeks to limit global warming by cutting greenhouse gas emissions, soon into his first term. The pact went into force earlier this year.
Most scientists believe that growing emissions of greenhouse gases such as carbon dioxide from the burning of petroleum, coal and natural gas are causing global warming. They say the warming will disrupt farming, tourism in cold climates, raise sea levels by melting icecaps, cause more extreme weather like hurricanes or droughts, and wipe out thousands of animal and plant species by 2100.
NO SILVER BULLET
The institutional investor pledge follows a plan unveiled on Monday by the giant industrial and media conglomerate General Electric Co. to nearly double its annual research and development investment for clean technologies to $1.5 billion by 2010. Mindy Lubber, president of Ceres, a Boston-based coalition of investors and environmental leaders, said that is the type of move that can protect companies from liability risks going forward.
Jim Rogers, the top executive of coal utility Cinergy, which pledged in 2003 to reduce carbon emissions by 5 percent by 2010, said his company has taken a multifaceted approach to cutting emissions, including switching from coal to natural gas, investing in renewables and conservation.
"There's no silver bullet, there's no one answer," he said about cutting emissions.
Cinergy agreed on Monday to be bought by Duke Energy Corp., the leading US nuclear utility. Rogers, who will become CEO and president of the new company, said environmental considerations encouraged the merger, which would let the company retire some coal plants older than 50 years old.
Abby Joseph Cohen, a partner and chief portfolio strategist for investment bank Goldman Sachs, said moves by companies to disclose climate risks "represent an enormous move in the right direction."
Her company has created a scorecard of energy firms according to actions they have taken on global warming.
But Cohen cautioned that as clean technologies are new, it is hard to find studies that investment in clean energy companies have led to better returns.
Denise Nappier, the state treasurer of Connecticut, said the longer companies fail to disclose their climate liabilities including possible future regulations and lawsuits, the more they stand to possibly get hurt.
"In the absence of an accurate weather forecast, there is the greater possibility of getting caught in rain without an umbrella," she said.
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