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developing countries have very little faith left inwestern financial institutions and capital markets afterthe crash. It is as simple as that and you will not seeany reference to private finance in any communicationfrom Copenhagen."One week later, on 17 December, a group of theworld's largest asset owners1wrote a letter to the headsof government gathered in Copenhagen expressingtheir concerns. The two-page letter stated: "Amongst other issues, provision of private investmentand finance will be fundamental to the creation of aclimate resilient infrastructure that addressesconcerns at the heart of the challenges associated withadaptation to global warming and, notably, for thosechallenges already faced by the most vulnerabledeveloping countries. It appears that, at best, the roleof capital markets, private finance and the importanceof the vast concentrated pools of savings held in trustby institutional investors, has a most tentative footholdin the collective thinking of negotiators within theCoP15 discussions. At worst, private investmentmechanisms and capital markets may not bereferenced in a COP15 agreement, or subsequentagreements, for reasons of political expediency."Since Copenhagen, a number of things have happenedthat will work to change the way private finance andinvestment approach the climate change policy-making process. Firstly, the launch in February 2010by UN Secretary General Ban Ki-Moon of a High LevelGroup of 19 politicians and financiers to exploreoptions on how to finance multilateral andgovernmental commitments to climate changeAbove: Paul Clements-Hunt (left) and RobertTacon (right)052FINANCEmitigation and adaptation is a positive step that willgive hope to private financial services. The work andfindings of this group have given a sense that the roleof private finance and markets is not forgotten and willfilter into the UN policy process in a more focused wayfrom the highest political level.Secondly, the finance and investment groups, whileunderstanding the need to see and be seen at globalpolicy-making events such as the annual UN summits,have also come to appreciate the power of well tailoredand tightly targeted action towards policy-makers atthe national and regional levels. In terms ofrepresenting their case in the multilateral policyprocesses, notably the UNFCCC meetings, thefinancial services and investment community aredistinctly the "news boys on the block" compared withthe energy, utilities and carbon-intensive parts of th ebroader industrial and business community. In short,the financial services and investment community as acollective body were playing catch up in terms of globalpolicy-making politics. They have only come to "theparty" in the last few years and in contrast to otherindustry groups, were lagging way behind.Thirdly, all eyes in carbon finance and investmentcommunities will remain transfixed on the "ebb andflow" of hope and despair in the USA, with efforts bylaw-makers there to deliver a meaningful climate bill.Many informed observers within finance andinvestment are coalescing around two points: firstly,that no meaningful deal can come at the global levelwithout US domestic politics passing a solid climatebill and, secondly, that the likelihood of that happeningin 2010 has diminished. And with it, the hope for a

" "BIOGRAPHIESRobert Tacon spent over 35 years in the bankingindustry, with some 27 years with Standard CharteredBank, before retiring in March 2007. During his lastten years with Stanchart, he initiated itsenvironmental risk management policies andprocesses, which were eventually expanded to coversocial and climate change issues. Mr Tacon alsointroduced the Equator Principles into StandardChartered and was the bank's representative withUNEP FI from 2001. He was the Treasurer of theInitiative for two years, before taking on the role ofChair in 2007. He stepped down in December 2009after hosting the highly acclaimed UNEP FI GlobalRoundtable conference in Cape Town in October2009. He is is the Managing Director and founder ofBoundes Sustainability Limited - a company thatprovides training, policy development and climatechange solutions primarily to the banking industry -and continues to have an advisory role with UNEP FI.Paul Clements-Hunt has been the Head of the UNEPFinance Initiative since November 2000. UNEP FIwas instrumental in the 2004-06 development andlaunch of the UN Principles for ResponsibleInvestment (PRI). The PRI is now backed by over400 institutional investors representing more thanUS$16 trillion in assets under management. MrClements-Hunt, who was one of the two lead UnitedNations representatives throughout the PRInegotiations in 2005-06, sits as the UNEPrepresentative on the PRI Board.FINANCE053IN TERMS OF DOMESTIC POLITICAL HORSE-TRADING IN THE US, THE ACHIEVEMENTOF BRINGINGTHESE MAJOR DEVELOPING COUNTRIESDEEPER INTO NEGOTIATIONS WAS A SIGNIFICANTSTEP FOR THE US PRESIDENTglobal deal has shifted from the UN COP16 in Cancunto the COP17 meeting in South Africa at the end of2011. As the Financial Times2puts it: "Hopes ofenacting a US climate change law this year havedimmed. Circumstances conspire against it, and evenif conditions were helpful, no measure that raises thecost of carbon-based energy - as any meaningful lawmust do - is ever going to be wildly popular."Despite the rollercoaster ride of the global policyprocesses around climate change, and the fact manypolicy questions remain, there is a feeling abroad insome of the smartest and most forward-looking cornersof the investment universe, that a line in the sand hasbeen crossed for carbon. Those investors who oftenlead the "finance and investment herd" rather thanforming part of it, understand that a carbon-constrained future will be part of investment realityand are positioning for that. Despite the crucifyingnature of 2007-8, the uncertain rebound of 2009, andthe crushingly difficult fundraising environment of thepast few years, notable examples spring to mind.Investor George Soros, who sits on the UN SecretaryGeneral's climate finance group, spoke to a privatedinner at the World Economic Forum meeting in Davosin January 2010, a few weeks after the anticlimacticlast few hours at Copenhagen. The philanthropiststressed the need for innovative solutions from publicand private actors. He then sketched one such climatefinance solution in terms of turning the US$30 billionin "quick start" public financing promised atCopenhagen into a US$100 billion climate fund,through a non-orthodox use of the Special DrawingRights of the International Monetary Fund (IMF). Equally, one of the most respected investors in the Cityof London, Stanley Fink, formerly of the UK's ManGroup (one of the largest hedge fund groups in theworld), has been active in the past two years providingseed funding for two environmentally focusedcompanies that base their investment philosophy onopportunities connected to a transition to a low-carbon, resource-efficient economy. If anecdotalevidence is to be believed, there is a growing group ofhard nosed, mainstream investors who have got themessage that return on investment and responsibilityof investment - the two ROIs - can be aligned, andthat alignment starts in the carbon markets withopportunities linked to climate change.And there is one more important positive whichfinance and investment can take from Copenhagen. Itis the fact that US President Obama did return fromthat windy, wet and cold capital with something neverachieved before - the BRICs3at the "emissionsreduction table". In terms of domestic political horse-trading in the US, the achievement of bringing thesemajor developing countries deeper into negotiationswas a significant step for the US President. Closing itsrecent editorial on the prospects of a climate bill in theUS in 2010, the Financial Times did offer up thesmallest glimmer of hope: "It goes without saying thata cap-and-trade law or, better, an outright carbon tax,is needed and eventually it will happen. Afterhealthcare, nobody should say the chances of reform in2010 are nil, but the odds look long.4" n1 On 17 December, 2009, the Board of the Principlesfor Responsible Investment (PRI), an investorpartnership backed by more than US$20 trillion inassets, wrote to heads of government in Copenhagento express their frustration at the limited engagementat CoP15 between climate policy-makers and theinvestment community. The PRI is an investorinitiative in partnership with UNEP Finance Initiative(www.unepfi.org) and the United Nations GlobalCompact (www.unglobalcompact.org/).2 "A carbon long shot," Financial Times page 8, 17May, 2010.3 BRIC, an acronym first used by Goldman Sachs'Chief Economist Jim O'Neill in 2001 to capture theeconomic exuberance of Brazil, India, China andRussia, with South Africa added later by someobservers to form BRICS.4 "A carbon long shot," Financial Times page 8, 17May, 2010.