Fund industry will play key role in climate change investing, Deutsche Bank's Kevin Parker says
DeAM Signs United Nations Principles for Responsible Investment, Joins Investor Network on Climate Risk
Deutsche Bank’s Kevin Parker will today tell an influential United Nations conference that the mutual fund industry can play an important role in helping the global economy respond to the challenge of climate change. Parker, Global Head of Deutsche Bank’s Asset Management division (DeAM) and a member of the Bank’s Group Executive Committee, is speaking this afternoon at the United Nations Investor Summit on Climate Risk in New York.
Parker says: “About $26 trillion is held in mutual fund funds worldwide. As asset managers, we can play a critical role in mobilizing this vast pool of capital to support companies that respond most effectively to climate change.
“Climate change will affect almost every industry and region. The mutual fund industry can facilitate and accelerate this process, first by developing investment strategies and products that take account of the impact of climate change, and second by helping investors better understand this phenomenon and how it impacts their investment decisions.
“Our retail fund business, known globally as DWS, had around $10 billion of assets under management (AuM) in climate-related funds at the end of November 2007 – 15% of the estimated $66 billion** raised so far globally in the mutual fund space. By year-end 2007, DWS AuM had grown to approximately $11bn. Our fund distributor, DWS Scudder Distributors, Inc., launched the first climate change fund in the US in September 2007.”
Parker adds: “There is a common misconception that a trade-off exists between environmentally responsible investing and strong investment performance. I believe that, on the contrary, it is a win-win for fund investors and businesses as investor capital is channelled towards companies that profit from mitigating and adapting to climate change. Climate change is going to be one of the dominant investment themes of the foreseeable future. It will be an important source of potential returns.
“The investment opportunities will improve radically when we overcome a further misconception: that fossil fuels are cheap compared with alternative energy. The apparent price differential is illusory because the ‘externalities’ of fossil fuels are not normally priced in – for instance, the cost of cleaning up the pollution they cause. However, in response to government regulation, a system of pricing carbon that takes account of these externalities is spreading through global financial markets. This will inevitably make alternative energy technologies far more economically competitive with fossil fuels.”
Parker also announced today that DeAM has signed up to the United Nations Principles for Responsible Investment (UN PRI). The six principles, which are voluntary, provide a framework to help investors integrate environmental, social and corporate governance (ESG) considerations into their investment activities. At the start of 2008, the UN PRI had almost 200 signatories, representing more than $10 trillion of assets under management.
To encourage investor awareness, DeAM has also joined the Investor Network on Climate Risk (INCR). INCR is a global network of institutional investors and financial institutions that promotes understanding of the financial risks and investment opportunities posed by climate change. Launched at the first Institutional Investor Summit on Climate Risk at the United Nations in November 2003, INCR now includes more than 60 investment institutions collectively manage nearly $5 trillion of assets.
** This figure identifies climate change-related mutual funds with data provided from FERI and SimFund. A fund’s inclusion is based on fund classification and criteria applied by DeAM (funds invested primarily in climate change opportunities, alt/renewable energy, environmental/green/sustainable and water).
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With approximately $815 billion in assets under management globally (as of 31 December 2007), Deutsche Bank’s Asset Management division is one of the world's leading investment management organizations, not just in size, but in quality and breadth of investment products, performance and client service. The Asset Management division provides a broad range of investment management products across the risk/return spectrum.