Climate Change: Investor Summit Assesses Risks and Opportunities

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Leading United States and European institutional investors, collectively managing more than $5 trillion in assets, gathered for a day-long summit at UN Headquarters in New York on 10 May 2005 to explore the financial risks and opportunities of global climate change and to develop responses. At the proceedings' conclusion, summit participants, including an unprecedented grouping of major pension funds, investment firms, State treasurers and foundations, joined the United Nations to back a new call for urgent action by the global investment community to tackle the threat of climate change.

Having made significant progress since the first summit in November 2003 in increasing investors' awareness about the financial impact of climate change and in improving corporate disclosures of the risks, the group turned their attention to defining the next round of needed initiatives. With the entry into force of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), there was a greater sense of urgency at the 2005 summit to learn more about the impact of a carbon-constrained economy on investors' portfolios and the investment potential for a new generation of clean energy technologies. "The Kyoto Protocol has come into force.... But Kyoto is only a first step", said Secretary-General Kofi Annan in a video message opening the second Institutional Investor Summit on Climate Risk, co-organized by the United Nations Foundation (UNF), the United Nations Fund for International Partnerships (UNFIP), Ceres (Coalition for Environmentally Responsible Economies), the United Nations Environment Programme (UNEP) and the Investor Network on Climate Risk. "We need a framework for the years beyond 2012 that embraces all countries and makes full use of new technologies", Mr. Annan said. "Your choices and pronouncements can make decision makers in government and industry take climate change seriously. And your investments can point the way toward smart policies and breakthrough technologies for energy and transport." He encouraged summit participants to think "big" and "long term".

Senator Timothy E. Wirth, Summit Co-chairman and UNF President, framed the links between energy policy, global climate change, national security and development. "We should be focusing on the opportunities that will come from developing an energy policy that addresses global climate change and, in doing so, enhances our national security and affords the world's poorest people a chance to participate in the modern economy. At the UN Foundation, we view energy and climate policy not as hand-wringing problems but rather as enormous opportunities for transforming the world's economies and making us all more secure." That view was equally emphasized by the Summit Co-chair, Connecticut State Treasurer Denise L. Nappier. "Corporate and financial leaders need to look strategically at climate change and how it will impact the long-term health of businesses, industries and our economy. Institutional investors are interested in sound, long-term value, but our ability to make solid investment decisions depends on a thorough evaluation and full disclosure of risk." Investors can also benefit from the enormous opportunities that are arising as greenhouse gas limits are enacted more widely around the world. "The risks are real, but so too are the opportunities", she said.

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Global temperatures are rising due to the concentration of carbon dioxide (C[O.sub.2]) and other greenhouse gas emissions, according to Harvard University Professor John Holdren. As a result, we will see more erratic patterns in the weather, including waves, storms, floods, droughts and wildfires within the next 25 years. "Evidence is mounting that climate change is well underway, as indicated by the rapidly shrinking coverage of ice in Antarctica and Greenland. The average temperature of the earth's surface is 0.8 degrees Celsius above the average. …