As the world’s money elite gathers in Davos this week, attention should turn to the only pool of long term capital that can realistically be deployed on such a scale to make a transition to renewable energy possible: the money found on the balance sheets of pension funds, insurance companies, and endowments.
Last year climate change was a main focus of the World Economic Forum’s annual conference in Davos. In December we saw a historic agreement reached in Paris where every nation pledged to cut carbon dioxide emissions.

…the challenge of financing renewable energy on the scale needed to ward off the worst effects of climate change is absolutely astounding.

Yet the challenge of financing renewable energy on the scale needed to ward off the worst effects of climate change is absolutely astounding. Currently about $300 billion is spent on renewables each year. That will have to be doubled or tripled over the next decade if warming is to be kept under 2 °C. This level of financing goes beyond the means of governments and of investors specialized in renewable energy.

Globally, institutional investors hold approximately $80 trillion dollars of assets, including $45 trillion dollars on the balance sheets of insurance companies ($25 trillion), pension funds ($20 trillion), and sovereign wealth funds ($5 trillion). Overall they represent nearly a third of global financial assets.