Institutional investors are under pressure to maximise returns amid "ultra-low" interest rates, and are unlikely to invest in projects that mitigate climate change unless forced to do so by governments, according to a veteran fund manager.
Stuart Leckie, chairman of Hong Kong-based pension fund consultancy Stirling Finance who advised Beijing on the mainland's pension reform, said at the First Global Investor Forum on Climate Change in Hong Kong on Friday: "Pension funds and insurance firms are under so much pressure to perform at the moment, given ultra-low interest rates, it's difficult to see them doing anything at all that is not going to maximise their returns."
Tom Murley, head of renewable energy at London-based private equity firm Hg Capital, told the forum that investment returns on companies focused on carbon emission mitigation-related businesses had underperformed those of companies in traditional industries. Also, slumping stock prices of many listed renewable energy firms meant it has been difficult for investors to exit private equity investments by floating their investees on stock exchanges. He said investors would need to take a longer investment horizon to realise the returns they were looking for.
Employers that provide defined benefit pensions to employees would have to make up the shortfalls resulting from investing in climate change mitigation companies, Leckie noted.
Leckie said sovereign fund managers should take the lead in contributing towards socially responsible investment, as they could make investments with long-term objectives.
Ewen McDonald, co-chairman of the United Nations-backed Green Climate Fund, said private funding was key to plugging the funding gap towards its goal of raising US$100 million by 2020 to help developing nations ease the impact of climate change. The fund was born out of the 2009 global climate talks in Cancun, Mexico, with much of the funding expected to be contributed by governments.