On January 14, investors responsible for $13 trillion in assets jointly called for a strong policy response to global climate change. Coming on the heels of the UN Framework Convention on Climate Change (UNFCC) summit in Copenhagen, the Investors’ Summit on Climate Risk showed broad private-sector support for public policy initiatives to combat climate change.

What will be the practical impact of carbon pricing for investors? A survey of RiskMetrics research shows that gaps in the existing regulatory patchwork could create perverse advantages for companies, investors and governments who avoid strong carbon regulations.

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In a report released January 6, shareholder coalition Ceres found that many asset managers don’t account for risks associated with climate change. Ceres surveyed 84 managers who are collectively responsible for $8.6 trillion in assets. 44% don’t believe that climate risk is financially material; more tellingly, as Barry B. Burr notes in Pension & Investments, 71% only consider climate risk when they’re marketing a “green” fund.

Spotting Material Risks beyond this Quarter

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An interesting coalition of groups joined together for a side event at the Copenhagen climate change summit on Dec. 12. Gathered were the Worldwatch Institute, a respected think tank represented by its leader, Christopher Flavin; the United Nations Foundation, established by Ted Turner, and represented by its head, Tim Wirth, a former Senator and the main US negotiator for the Kyoto Climate Conference during the Clinton administration; and the American Clean Skies Foundation, which promotes natural gas as a clean alternative to coal, represented by its CEO, Gregory Staple.

Their three-hour conference was about a low-carbon energy source that could reduce US dependency on both imported oil and domestic coal: shale gas.

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[Ed. Note: RiskMetrics analyst Mario Lopez-Alcala is attending the Copenhagen summit as an official observer.]

As the Copenhagen climate summit draws to a close, many are disappointed by the lack of progress being made here. The biggest announcement is likely to be a plan to compensate countries that preserve forests and other natural landscapes that store carbon dioxide, the main greenhouse gas tied to global warming.

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As part of RiskMetrics’ involvement with the COP15 climate conference in Copenhagen, I spoke on a United Nations Environment Program Finance Initiative (UNEP FI) panel called “Construction Counts for Climate.” I represented UNEP FI’s Property Working Group (on which RMG’s Mario Lopez-Alcala has served for two years), and was joined by the Finnish Minister of Housing and other UNEP representatives.

“Construction Counts,” as the built environment is responsible for at least 40% of global CO2 emissions, according to the Intergovernmental Panel on Climate Change. This actually represents a great opportunity for emissions reduction, as buildings’ emissions can be reduced drastically by making better use of existing technology. COP15 participant Jens Laustsen, senior energy policy analyst (buildings) at the International Energy Agency (IEA), estimates that 75% of the energy used in most buildings can be saved.

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The climate change scientists whose emails were recently hacked are living their worst nightmare. Like many of their colleagues, these scientists had long been frustrated by a handful of vocal global warming skeptics. The hacked emails gave skeptics a new opening to sow doubts about global warming, just as media attention turned to the Copenhagen climate summit.

These scientists spoke in some private emails of resisting Freedom of Information Act requests and boycotting journals that provide an ongoing platform for the skeptics’ views. Neither the hacking nor the censorship should be condoned. But when this dust-up settles, these things will be certain:

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This week, world leaders meet in Copenhagen to coordinate their efforts to address global climate change. As summed up by a RiskMetrics fact sheet on the event, the summit’s daunting goal is to set fair, achievable emissions reduction targets for both developed and developing nations.

The Financial Times’ Martin Wolf has succinctly stated why this will be so difficult:

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[Ed. Note: In preparation for the Copenhagen summit, the KLD Blog will present some perspectives on global climate policy. The following analysis of Australia’s rejection of an emissions-credit trading scheme comes from RiskMetrics analyst Mark Barraclough. Mark is based in Sydney and researches Australian firms, with a focus on the energy and extractives sectors.

As the US and other developed-world democracies debate their own “cap and trade” schemes, the case of Australia’s Carbon Pollution Reduction Scheme (CPRS) may prove instructive.]

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This week, Congress and the Obama Administration are discussing the future of American energy policy. The outcome of these efforts is unknown, but forward-thinking investors already expect big changes in the energy sector. The markets’ preparation for a less-polluting future includes the October announcement that First Solar, a solar-power technology firm, will soon join the benchmark Standard & Poor’s 500 index.

Investors expect a bright future for First Solar, a FTSE KLD Index constituent since 2007, partly because they assume that governments will eventually tax carbon emissions. If the carbon output of producers and consumers is taxed, then the relative cost-efficiency of solar and other renewable energy sources will increase.

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As corporations have come to recognize growing interest in their environmental impact, most firms have chosen to constructively engage with the public. The “greenest” companies have reduced their energy use and the impact of their products and operations, and many others have at least claimed to do so.

Such “greenwashing” is a concern of investors who consider environmental, social and governance (ESG) factors in their evaluations of corporate sustainability. But even as major firms have chosen, perhaps grudgingly, to work with their ESG stakeholders, at least one business lobby has taken a different tack.

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