Currently, pension funds, insurers, mutual funds and sovereign wealth funds hold more than $80 trillion in assets. Pension funds alone managed over $20 trillion in assets as of the end of 2012, with a net annual inflow of savings of over $1 trillion. But only 1 per cent of those assets were invested in infrastructure projects, with an even smaller fraction in clean energy projects.
The High-Level Principles of Long-Term Investment Financing by Institutional Investors, prepared by an OECD Taskforce working together with G20 members, establish a framework for encouraging institutional investment in long-term assets. They set out the preconditions to long-term investment, such as the need for stable macro-economic conditions, a clear and transparent government plan for projects, as well as opportunities for private sector involvement via public procurement and public-private partnerships investment. The principles also address specific policies, including:
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improving incentives to mobilise higher levels of long-term savings
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strengthening the governance of institutional investors to provide the right incentives for the adoption of a long-term perspectives and the management of often illiquid assets
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ensuring the tax and regulatory framework reflects the particular risk characteristics of the investments , promotes long-term strategies and lowers barriers
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informing and educating consumers about the virtues of long-term saving.
As part of its work for the G20, the OECD will also be intensifying monitoring of institutional investors and carrying out in-depth analysis of a variety of policy and market-based incentives to facilitate long-term investment, including in clean energy.
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