The proposals have been tabled by the Institutional Investors Group on Climate Change (IIGCC) which represents more than 100 European investors worth a combined €10 trillion. Their policy paper, unveiled on Thursday, follows the launch in January of the EU’s Investment Plan for Europe, (the “Juncker Plan”), a € 315 bn scheme to boost private investment in European infrastructure projects.
The “Juncker Plan” rests on using €21bn of EU money to unlock private sector capital over the next three years to achieve the €315bn goal.
The European Fund for Strategic Investment (EFSI) is the vehicle established under the plan to mobilise the €315bn.
The Institutional Investors Group on Climate Change says that European institutional investors have in recent years “fallen short” of their aim to allocate 8% of total assets to infrastructure.
It says, however, that their investment in infrastructure projects can be increased – if the conditions are right.
The “12 fixes” proposed by the investors include an exclusion of “high carbon projects” from funding consideration.
The IIGCC says that the EU’s 2030 framework must guide all investment support provided through the EFSI. All projects should be assessed according to their fit with a low-carbon economy, it says.
It also recommends an EU level mechanism to mitigate risk from retroactive policy changes at member state level.
Retroactive changes to renewable energy policies have, it says, brought low carbon investment to a standstill in some countries and caused investors to lose billions.
The group says that protection from this risk would “restore investor confidence.”
Pooling infrastructure projects together would, adds the group, also help to attract more potential investors and diversify risk across projects with different risk profiles.
The EU, says the group, should consider appointing representatives of the institutional investment community to EFSI board.
Stephanie Pfeifer, CEO of the group, said, “The Investment Plan has the potential to usher in a new era of low carbon infrastructure investment across Europe, but to achieve this it must be structured in the correct way.
“The 12 proposed fixes provide clear solutions to really scale up investment while also identifying the barriers that have held investment back in the past.
“The challenge is a big one: the IEA says $2.2 trillion of investment in energy infrastructure in Europe is needed to 2035. Investors want to work with the EU to ensure this plan delivers the transformative levels of investment it is targeting.”
Further comment came from Torben Moger Pedersen, CEO of PensionDanmark, who said, “As a significant private sector investor in European infrastructure – as well as partner alongside the Danish government in the Danish Climate Investment Fund – PensionDanmark knows what it takes to make a public-private infrastructure investment fund work.
“The Investment Plan provides a unique opportunity to re-shape the European landscape in favour of low carbon infrastructure investment.”
He adds, “The 12 fixes set out what investors need to enable them to play the role the EU envisages.”
The Institutional Investors Group on Climate Change (IIGCC) is a forum for collaboration on climate change for European investors.
By Martin Banks