Deutsche Bank’s Asset Management division (DeAM) today published research which provides investors with an analysis of climate change policies and assigns a risk rating to 109 countries, states and regions based on key government mandates and supporting policy frameworks. The report, titled “Global Climate Change Policy Tracker: An Investor’s Assessment” (Climate Tracker), was produced by DB Climate Change Advisors (DBCCA), DeAM's institutional climate change investment and research business, working with the Columbia Climate Center at the Earth Institute, Columbia University.
The “Climate Tracker” is the first publicly-available analysis of its kind. It incorporates results of a model prepared by Columbia Climate Center researchers that estimates the impacts on carbon emissions of each of 270 major climate policies, and aggregates them at country, regional and global levels. The “Climate Tracker” provides a risk rating of countries and regions based on their relative attractiveness to investors. It is designed to help investors identify the best risk-adjusted returns in climate change investment opportunities around the world. The “Climate Tracker” is available online at: http://www.dbcca.com/research. Highlights of the research include the following: • Even if current and select proposed policies were to make their maximum possible impact, emissions in 2020 would still exceed the amount needed to limit the average world temperature increase to 2 degrees C. To meet such a goal, emissions would need to be reduced further, by an amount equivalent to the current annual emissions of the U.S. economy.
• More capital is required to mobilize climate change industries, and more action by government is required to attract capital. Investors are most attracted to countries and regions with comprehensive, integrated government plans that are supported by strong incentives, such as feed-in tariffs.
• Governments must create transparent, long-term, and certain policies to attract capital. While the carbon markets may offer long term solutions, at present investors are driven by on-the-ground mandates and incentives.
• Energy efficiency could help deliver significant reductions in emissions. Since efficiency provides savings in the long-term, it is essential that governments tackle market failures to encourage capital deployment in this area. "What investors want is Transparency, Longevity and Certainty – “TLC” – in policy regimes to mobilize capital," said Kevin Parker, Global Head of DeAM and member of Deutsche Bank’s Group Executive Committee. “Many major emitters such as the US and the UK do not have enough “TLC” in their policy frameworks. Our rankings show that China has a lower risk for climate change investors, as does Germany, but the research also shows that in order to avoid catastrophic climate change, all countries will have to do more to encourage investment.” "Carbon markets may provide policy support to investors in the long term. However, for the foreseeable future, investors will be focused on mandates and incentives,” said Mark Fulton, Global Head of Climate Change Investment Research at DeAM. “We believe that appropriately-designed and budgeted feed-in tariffs have demonstrated their ability to deliver scale.”
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