The G20 leaders have endorsed the latest set of principles from the Organization for Economic Cooperation and Development (OECD) on long-term investment financing.

The principles aim to help policymakers facilitate investment in long-term assets, such as infrastructure and renewable energy projects, by institutional investors with long duration liabilities and time horizons, including pension funds, insurers, and sovereign wealth funds. It notes that these sorts of investors control more than US$80 trillion in assets, but that only about 1% of that is invested in infrastructure projects.

The principles, which were prepared by an OECD task force along with various G20 members, establishes 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 macroeconomic conditions, clear government plans for projects, and opportunities for private sector involvement.

They also address specific policies, including: incentives to mobilize higher levels of long-term savings; strengthening the governance of institutional investors to provide the right incentives for long-term investing; ensuring that the tax and regulatory framework promotes long-term strategies and lowers barriers; and, informing and educating consumers about the virtues of long-term saving.

“The fall-out from the financial crisis has exposed the limitations of relying on traditional sources of long-term investment finance such as banks,” said OECD secretary-general, Angel Gurría. “Governments are looking for other sources of funds to support the long-term projects that are essential to a sustaining a dynamic economy. There is huge potential among institutional investors to support development in a range of areas such as infrastructure, new technology and small businesses.”

The OECD said it will also be intensifying its 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.