Pension funds join to fight climate change

Hugh Wheelan
The Observer,
Sunday August 3 2008

A group of the world's biggest pension funds brought together privately by Prince Charles and known informally as the P8, an allusion to the G8 group of the world's wealthiest nations, is to release an action plan this summer on fighting climate change using their investments.
It will be sent to world governments with the aim of lobbying for regulatory and financial support that could enable pension funds to start using their financial muscle to take stakes in companies developing sustainable energy products. The investors, which collectively manage about $3 trillion in retirement assets, met the prince last week to discuss the document's final contents.
A spokesman for the University of Cambridge Programme for Industry, which runs the Prince of Wales' Business & the Environment Programme, said the prince had participated personally in the debate, and the investors are expected to reach a final agreement this month.
The P8 group - actually 10 pension funds, three each from Europe, Asia, and the US plus one from Australia - is understood to include the Universities Superannuation Scheme, which runs more than £30bn for UK higher education workers. Other members are ABP, the pension plan for Dutch civil servants, as well as CalPERS and CalSTRS, the two largest US pension funds, which manage the retirement pots of Californian civil servants and teachers respectively.
The plan is expected to outline the scale of investment needed in firms specialising in renewable energy and carbon dioxide reduction technologies if countries are to meet international emissions cuts targets. It will suggest how pension fund capital could better finance such companies to meet these objectives.
In June, Gordon Brown announced plans to build up Britain's clean power supply in order to reach the EU-imposed target of producing 15 per cent of the country's energy from renewable sources by 2020. He said it would require £100bn of investment from the private sector, which the government will encourage with financial incentives.
Pension funds are considered a prime source of potential investment because their long-term horizons are ideal for investing early and consistently in the companies that will produce profitable clean energy solutions.
Last September, the prince brought together 37 UK insurance companies to launch ClimateWise, an initiative to tackle climate change and encourage responsible environmental behaviour by insurance clients. Launching that initiative, he said: 'We have to think of this as if we were in a wartime situation.'
· Hugh Wheelan is Editor of Responsible-Investor.com