A Swedish state-backed pension fund worth $38 billion, called AP4, has announced plans to reduce its holdings in carbon intensive assets and build a framework for more investment in clean energy, particularly in emerging markets.
Chief Executive Mats Andersson explained the decision to invest in an emerging markets fund – which will consist of companies that have both low-carbon emissions and low fossil-fuel reserves – is down to the weight of evidence that suggests “companies with a high carbon footprint will perform worse” over the next 10 years.
If it works, we will increase our exposure so that hopefully it will be a much bigger part of our portfolio. We want to do this on a global basis. In 10 years time, carbon will be priced and valued in a different way so that companies with a high carbon footprint will perform worse. This sustainable approach isn’t about charity, but about enhancing returns.
Across the border, Norway has expressed strong interest in using money from its sovereign wealth fund – the world’s largest, valued at $750 billion – to invest in sustainable companies and projects in developing countries, and also to make substantial investments in the renewables sector.
The move was welcomed by green groups who believe the decision could be a game changer.
Samantha Smith, head of the global climate and energy initiative at WWF said:
If Norway actually does this, it will be an unprecedented shift in the global investment community and also for tangible action on climate change. We now look to the Government of Norway to take the next step by putting thoughts into action.
These developments, once again, demonstrate the financial industry’s growing recognition of the need for fossil fuel divestment and clean energy investment.
The moves stand in accord with the latest call to action from the UN Secretary General Ban Ki-moon, who urged the finance community to step up its support for technologies, policies and practices that can help combat climate change.
Speaking to investors in Washington D.C. yesterday he urged the sector to “facilitate new business models and support entrepreneurs in the developing world where demand for clean investment solutions is greatest”.
Climate change is the single greatest threat to sustainable development. Yet too often, one important fact gets lost amid the fear: addressing climate change is one of our greatest opportunities. With enlightened action, we can create jobs, improve public health and protect the environment.
Financial analysts say that if Norway pursues their newly stated interests to this effect, it could prove to be a game-changer by encouraging other major investors to follow suit.
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