Countries ranked for climate change investments

The bank’s researchers compiled 270 policies, regulations and mandated emissions targets to create a risk profile for investors. Its overall risk assessments, however, were general, ranking countries or regions on a scale of one to three and most listed as a two.

Delegates from 192 countries are to meet in Copenhagen, Denmark, in December for a decisive U.N. conference intended to agree on a successor to the 1997 Kyoto Protocol, which controls carbon emissions for most major economies. The United States rejected Kyoto, but says it wants to be part of the agreement due to replace it in 2012.

Kevin Parker, global head of Deutsche Bank Asset Management, said only private capital can raise the investment needed, estimated between $300 billion to $700 billion a year, for new industries like solar and wind power to keep the Earth from overheating.

"The policies that are in place today don’t get us there, not even close to there, under the best of circumstances," Parker said in a conference call with journalists.

Investors will go where risks are low, and will move on to safer businesses unless climate industries are better regulated, he said.

Deutsche Bank collaborated with the Columbia Climate Center of Columbia University to find that under the policies in place in 2007 the world will emit 59 gigatons of greenhouse gases by 2020 from 47 gigatons emitted in 2007. Scientists say emissions should be kept to 44 to 46 gigatons to remain in a relatively safe zone.

This report, "Global Climate Change Policy Tracker: An Investor’s Assessment" (Climate Tracker), 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 was produced by DBCCA, 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.

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.