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LiveEarth, Investors and Climate Change
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by Mindy Lubber:

When the Live Earth concert kicks off at the Meadowlands on July 7, rockers such as Bon Jovi and the Smashing Pumpkins will be joined by tens of thousands of boomers, Gen-Xers, Gen-Yers and a new group: Inves-Ters. A dozen of the nation’s largest investors, including TIAA-CREF, AIG and the New Jersey Retirement System, will be stomping their feet, too, calling for urgent action on climate change. What in the world are these buttoned-down suits doing at a rock concert in New Jersey? Looking out for our financial future, of course.

Global climate change poses enormous risks and opportunities for any investment portfolio and for our economy as a whole. That’s why a growing community of institutional investors representing $4 trillion in assets has called on Washington to get serious about this issue, and it’s why they are joining with Al Gore, the driving force behind Live Earth, to rock the Meadowlands, and hopefully the rest of the planet, into action on July 7.

The economic risks from climate change are substantial and no sector of the economy will be immune. Those coal-fired power companies in your retirement fund? They face financial risks from carbon regulations. U.S. automakers? They’re being left behind by Japanese competitors who are providing the fuel-efficient, climate-friendly cars that more consumers want.

But it’s not all about risk. From an entrepreneurial point of view, climate change presents a huge opportunity for U.S. investors who buy into the best technological innovations, such as renewable energy, bio-based fuels, carbon-capture and hybrid vehicles.

Yet, realizing this potential won’t be easy. Innovation and market development on this scale will require enormous amounts of capital. And investors tend to weight their equity portfolios towards companies focused on succeeding in stable and predictable markets, not on those gambling on doubtful, uncertain regulatory landscapes. The current lack of a coherent, comprehensive U.S. strategy for addressing climate change is hindering the ability of American businesses to invest and innovate.

Here is the key: Once this country knows what the regulatory playing field looks like – once aggressive targets are established for lowering greenhouse gas emissions and greater incentives are in place to encourage development of clean technologies – the untapped ingenuity of American enterprise will emerge, profits will be made and new jobs for Americans will follow.

And that means we need – some businesses will argue, they crave – a national climate change policy with specific, mandatory limits on carbon emissions. It is why 50 leading institutional investors such as F&C Asset Management and Allianz, as well pension funds in California, New York, North Carolina, Kentucky, Illinois and Maryland, have urged strong federal legislative and regulatory action on climate change. Many leading companies such as Merrill Lynch, BP America, Alcoa and DuPont have also joined the call.

They want predictability in addressing the climate challenge. They want to know what to expect.

Voluntary measures do not provide enough certainty for business to make needed investments. Only our national government has the power to create the incentives and clear market signals necessary to ensure a smooth transition to a low-carbon future. To unleash American progress and innovation, investors and companies need a mandatory national policy that dramatically reduces greenhouse gas emissions, and they need it now. Amid the music, that’s the message those suits will be sending at the Meadowlands.

Mindy S. Lubber is president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations working with companies to address sustainability challenges such as global climate change.

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