A group of the world’s largest investors have issued a statement calling on governments to take urgent policy action to tackle climate change and stimulate investment in clean technology.

Some 285 organisations, representing more than $20 trillion in assets, warned that current levels of investment in low-carbon technology and infrastructure are not meeting the $500 billion per year that the International Energy Agency said is required to contain anthropogenic climate change and keep temperature rises below two degrees Celcius.

“Climate change presents major long-term risks to the global economy and to the assets in which we invest,” the statement reads.

“At the same time, well designed and effectively implemented long-term climate change and clean energy policy (“investment-grade policies”) will not only present significant opportunities for investors in areas such as cleaner and renewable energy, energy efficiency and decarbonisation, but will also yield substantial economic benefits including creating new jobs and businesses, stimulating technological innovation, and providing a robust foundation for economic recovery and sustainable long-term economic growth.”

The group argues that policy risk is a major determinant of whether private sector investors put their capital into emerging technologies and new energy infrastructure.

Subsidies, tax breaks and so-called “feed-in tariffs” are often needed in the early stages of development for clean energy to be economically viable in the short term.

Governments need to put in place clear and well designed policy frameworks, backed by effective institutions, to reduce the risk of investments in clean technology and renewable energy, the statement said.

Stephanie Pfeifer, Executive Director at the Institutional Investors Group on Climate Change, which helped to coordinate the statement, said: “Policy risk has a critical influence on investment in low-carbon growth areas such as renewable energy. Attracting capital at the scale required to meet climate change goals will only be possible when low carbon investments are seen as attractive relative to higher carbon investments. Determined leadership on national and international climate and energy policy will be fundamental in shifting this risk/return balance in favour of low carbon investments”.

The group also said that the international community needs to set concrete emissions reductions targets; build financing mechanisms for climate change mitigation and adaptation projects; and support the development of working carbon markets, so that there is a source of private capital for emissions reduction projects.

The international community meets in Durban in December to continue negotiations on international efforts to reduce carbon emissions.