A coalition of investors, collectively representing more than €13.1 trillion in assets, has called on European leaders to maintain a ‘robust and predictable’ EU Emissions Trading System (ETS), saying that the system ‘must remain the bedrock of Europe’s clean industrial future’.
In a letter to European heads of state, which was published ahead of the planned European Council meeting on 18-19 June, the 49 investors state that climate neutrality, resilience, competitiveness and energy security need to be viewed as mutually reinforcing objectives, with the ETS at its core.
‘An important role’
‘The ETS is the world’s most successful carbon market,’ they state. ‘Its cap-and-trade design drives cost‑effective decarbonisation by cutting emissions wherever reductions are cheapest. It also ensures total emissions fall at the lowest overall cost via a long-term rising price signal.
‘The ETS has played an important role in incentivising low-carbon innovation, creating investment opportunities across sectors. These are all critical benefits for institutional investors with diversified, economy-wide portfolios.’
As the investors note, the ETS has already reaped benefits, including a reduction in emissions from electricity generation and industry covered by the scheme of around 50% since its introduction in 2005. In addition, they add that the system has helped support renewable energy development and reduced the bloc’s dependence on fossil fuel imports.
The investors outlined six principles they believe should guide the system in the 2030s, including maintaining a ‘clear and credible long-term trajectory’ for the ETS cap that is aligned with the EU’s 2040 and 2050 climate targets; ensuring transparent market governance; the implementation of an effective Carbon Border Adjustment Mechanism; greater use of ETS revenues to support industrial decarbonisation and energy system transformation; the linking of support measures with company-level decarbonisation investments; and the introduction of targeted policies to address obstacles facing energy-intensive sectors.
Net-Zero Asset Owner Alliance
The UN-convened Net-Zero Asset Owner Alliance (NZAOA) is among the organisations to support the call, stating that a reliable EU ETS gives investors the certainty they need to allocate capital to support the green transition.
“A robust and predictable EU ETS is not just a climate tool; it’s the foundation on which long-term investment decisions are made,” commented NZAOA co-chairs Josselin Kalifa, chief investment officer of the Caisse des Dépôts (CDC) Asset Management Division, and Toru Shindo, chief investment officer of the United Nations Joint Staff Pension Fund (UNJSPF).
“In a period of geopolitical uncertainty, policy stability is the most cost-effective stimulus Europe can offer. The NZAOA urges European leaders to strengthen the ETS as an investment signal that supports competitiveness, energy security, and the clean transition together.”
The full list of signatories includes Aberdeen Investments, ABP, Achmea Investment Management, AkademikerPension, Allianz SE, AP3, AP7 (Sjunde AP-fonden), Avon Pension Fund, BarmeniaGothaer Asset Management AG, CCLA Investment Management, Church of England Pensions Board, Church of Sweden, CNP Assurances, EOS at Federated Hermes Ltd, Erste Asset Management, ESG-AM, Ethos Engagement Pool, Ethos Engagement Services Clients, Ethos Foundation, Etica Funds – Responsible Investment, Generation Investment Management LLP, Gutmann KAG, Inyova AG, Ircantec, L&G Asset Management, LBP AM, LGPS Central Limited, Lombard Odier Investment Managers, M&G plc, MN, Momentum Metropolitan Life Ltd, MozaiC Asset Management, Net-Zero Asset Owner Alliance (NZAOA), NN Group, Nordea Asset Management, Nordea Life & Pension, North East Scotland Pension Fund, Oxfordshire Pension Fund, PFA Pension, PGGM Investment Management, Pictet Group, Planet A, Robeco, Royal London Asset Management, Sampension, Schroders plc, Suma Capital, SVVK-ASIR, Van Lanschot Kempen, and Velliv, Pension & Livsforsikring A/S.
The statement was coordinated by Principles for Responsible Investment (PRI) and the Institutional Investors Group on Climate Change (IIGCC). Read more here and here.
