Deutsche Bank 2010 Investing in Climate Change Report

Deutsche Bank 2010 Investing in Climate Change Report released at the Investor Summit on Climate Risk at the U.N that I talked about in my previous post. I am copying first section of the summary which itself is very detailed. I am ploughing through this as I write. I think this report with all its detailed investment analysis and the nature of the audience means that people think there are serious money at stake here. The document is very readable. Highly recommended.

Climate Change Investment Thesis and Opportunity

1. Demographics, socio-economic change and long-term energy demand drive increased global consumption of scarce resources
2. These drivers result in rapidly increasing emissions and corresponding changes to the earth's climate
3. DBCCA has established "Four Pillars of Climate Change" investment to provide an analytical framework for understanding the investor response to climate change
4. The scale of mitigating/stabilizing our climate will require unprecedented economic growth, which will result in low-carbon prosperity and job creation
5. Climate change must be understood in the context of an integrated framework of both halting and adapting to its effects
6. The climate change investment universe is broad, covering many technology sectors and themes
7. These sectors and themes are applicable to a variety of asset classes
8. Investors will pursue many different strategies across these asset classes, each with different risk attributes and environmental impact
9. A strategic risk premium for climate change, such as carbon beta, can be applied to traditional portfolios to analyze risk an optimize return

Investors Push for Rapid Action

This is from the Investor Summit on Low Carbon Economy .


Investors Representing $13 Trillion Call on U.S. and Other Countries to Move Quickly to Adopt Strong Climate Change Policies
“Cannot Wait for a Global Treaty,” Investors Tell Congress and other Government Policymakers at United Nations Investors Climate Summit

Saying “we cannot wait for a global treaty,” U.S., European and Australian investor groups representing $13 trillion in assets called on U.S. Congress and other global decision-makers “to take rapid action” on carbon emission limits, energy efficiency, renewable energy, financing mechanisms and other policies that will accelerate clean energy investment and job creation. Investors made clear today that there are competitive advantages for countries with comprehensive climate and energy policies.

I have written in the past about this coalition (INCR) which is pushing for systemic changes to get the low carbon economy. It represented 7T$ of assets when I last wrote. Now it looks like the coalition has expanded to represent about 13T$ of investment including CalPERS.


The investor statement suggests a great opportunity to make money.

While leading studies indicate that the costs of action to reduce GHG emissions are both affordable and significantly lower than the costs of inaction,2 developing a global low-carbon economy will nonetheless require substantially increased levels of investment from the private sector. For example, the UNFCCC Secretariat estimates that more than $200 billion in total additional investment capital for mitigation is required each year by 2030 just to return GHGs to their current levels by then,3 while the International Energy Agency estimates that additional investment of $10.5 trillion is needed globally in just the energy sector from 2010–2030 to stabilize GHG emissions at around 450ppm.4 This equates to roughly 0.1% of the total value of world financial assets and approximately 0.23% of the total value of debt and equity securities,5 so this is certainly an achievable level of investment – and one that would yield returns in terms of energy savings, energy security, reduced capital expenditures for pollution control, and avoided climate damages. But it is also well above current investment levels. Although public spending in this arena has increased recently to hasten recovery from the global recession, more than 85% of the total investments needed to meet the climate challenge will likely have to come from private capital.

Investors will seek every sound investment opportunity, but until governments establish policies and rules that make low-carbon strategies the clear strategic choice for all businesses, we will not be able to deploy capital into low-carbon investments at the scale required. Until then, our billions of dollars in investments will remain a ‘drop in the bucket’
compared to the trillions of dollars needed. To enable the necessary flows of private capital and allow us to fully assist in achieving a low-carbon and sustainable global economy, policymakers around the world must act swiftly. National policies are needed that provide greater certainty about the direction of climate and energy regulation, ensure transparent markets, facilitate wider and more open capital flows for carbon trading and investment, and benefit consumers and workers as they transition to a low-carbon economy. Accordingly, we see the following measures as being critical for unleashing the volumes of private capital urgently needed to meet the challenges of climate change: