FOR IMMEDIATE RELEASE
Climate Change Investor Groups Publish Second Report on Global Investor Practices Relating to Climate Change
Majority of investors have boosted their attention to addressing climate change, but gaps still remain in integrating climate risks and opportunities across investment portfolios
The North American Investor Network on Climate Risk (“INCR”), the European Institutional Investors Group on Climate Change (“IIGCC”) and the Australia/New Zealand Investor Group on Climate Change ("IGCC") have today jointly published a report detailing the investment practices of asset managers, such as primary fund managers, and asset owners, such as pension funds, towards climate change issues.
Conducted by Mercer, the report details the results of the second global survey of investment practices, based on survey responses in 2011 from 42 asset owners and 51 asset managers with collective assets totaling more than $12 trillion.
The results show that a strong majority of asset owners and asset managers view climate change as a material risk and make reference to this in their investment policies. As a consequence investors have retained, and in many cases, boosted their commitment to addressing climate change in their investment activities despite wider economic and financial challenges and continuing policy uncertainty.
Despite the encouraging progress, the report concludes that more progress is needed to translate climate-related investment policies, research and risk assessments into core investment decisions that reduce climate risks to portfolios and capture more climate-driven investment opportunities.
"While it’s encouraging that more investors are concerned about the risks of climate change, many of them could be doing more to protect their clients and portfolios from those risks," said Christopher Davis, director of Investor Programs at Ceres, the Boston-based sustainability leadership group that coordinates the Investor Network on Climate Risk, one of the survey’s three co-sponsors. “This summer’s extreme drought conditions, which are causing huge economic ripples across the U.S. economy, are the latest example of why investors should be making climate change a core consideration in their decision-making.”
This year’s survey shows that 83% of asset owners and 77% of asset managers view climate change as a material risk or opportunity in their investment portfolios. A similar proportion referenced climate risk in their investment policies – 67% of asset owners and 78% of asset managers.
More than half of the asset owners (57%) stated that they conduct climate risk assessments, with one quarter (26%) making changes to their investment strategies based on their assessment of climate risk. European and Australian investors had the strongest responses. Only 13% of North American asset owners reported making changes to their investment strategies based on their assessment of climate risks.
“It is encouraging that despite the turbulent economic climate investors have retained and in many cases built upon their engagement process relating to climate change. It is also important that investors embed climate risk assessments within investment decision-making processes, something they are now beginning to do. For progress to continue to be made, policy frameworks that stimulate low-carbon investment and provide investors with the tools to take further action will remain critical. Strong and stable policy also helps investors to adequately assess, quantify and therefore manage climate change risks alongside separate short-term risks,” said Stephanie Pfeifer, executive director of the European-based Institutional Investors Group on Climate Change (IIGCC),
There continues to be variation in progress regionally, with European and Australian investors leading their counterparts in North America with respect to overall practices in addressing climate change. This should not obscure the fact that some large US investors are undertaking noteworthy work in managing climate issues. Among the examples highlighted in the report:
- The New York Comptroller’s Office was cited for its strong direct engagement with electric power companies on climate risk issues through the filing of shareholder resolutions. The report cites one company engagement that contributed to the planned retirement of a half-dozen coal-fired power plants in order to reduce emissions.
- The California Employees’ Retirement Systems (CalPERS), one of the world’s largest investors with about $234 billion under management, is implementing a broad framework to integrate climate change and broader ESG (environmental, social and governance) factors across its entire investment portfolio.
Pax World Management Corp., a leading US manager in sustainable investments, has made climate change a mandatory component of its core portfolio construction process.
Other key report findings:
- The majority of asset owners (78%) consider climate change integration in manager selection, but mandates are rarely awarded solely on the basis of climate considerations. More than half (57%) of asset owners conducted formal or informal climate risk assessments of their portfolios.
- Asset owners are increasingly focusing on monitoring existing managers on climate issues –with 53% of owners undertaking this activity. However, less than 18% of asset owners have set clear expectations of their managers on climate change.
- A price for carbon is reflected in company evaluations where relevant (e.g. European Utilities) but given the low value currently attached to carbon the impact is generally immaterial.
To view the full report please visit: www.ceres.org/resources
About the Institutional Investors Group on Climate Change (IIGCC)
The Institutional Investors Group on Climate Change (IIGCC) is a forum for collaboration on climate change for European investors. The group’s objective is to catalyse greater investment in a low carbon economy by bringing investors together to use their collective influence with companies, policymakers and investors. The group currently has 78 members, representing assets of around €7.5trillion.
In detail, the IIGCC’s objectives are to: 1. encourage a pro-active approach amongst asset owners and asset managers on climate change; 2. improve company disclosure/performance on climate change; 3. encourage public policy solutions that ensure a move to a low carbon economy and which are consistent with long-term investment objectives.
For further information visit: www.iigcc.org
About the Investor Network on Climate Risk (INCR)
The Investor Network on Climate Risk (INCR) supports 100 institutional investors with assets exceeding $10 trillion in addressing the financial risks and investment opportunities associated with climate change. INCR works with its members on climate-related investment practices, corporate engagement, corporate disclosure and policy issues.
INCR is coordinated by Ceres, a US-based coalition of investors and public interest groups mobilizing sustainable business practices and solutions to build a healthy global economy.
Launched by 10 investors in 2003 at the first Investor Summit on Climate Risk hosted by Ceres at the United Nations, INCR has grown to include leading North American institutional investors. It works to shape responsible investment practices among state and city treasurers and comptrollers, public and labour pension funds, foundations, other institutional investors and a wide range of asset managers.
For further information visit: www.incr.com
About the Investor Group on Climate Change (IGCC)
The IGCC represents institutional investors, with total funds under management of approximately $700 billion, and others in the investment community interested in the impact of climate change on investments. IGCC’s 60 members aim to encourage government policies and investment practices that address the risks and opportunities of climate change, for the ultimate benefit of superannuants and unit holders. We also aim to:
- Raise awareness of the potential impacts, both positive and negative, resulting from climate change to the investment industry, corporate, government and community sectors;
- Encourage best practices approaches to facilitate the inclusion of the impacts of climate change in investment analysis by the investment industry; and
- Provide information to assist the investment industry to understand and incorporate climate change into the investment decision.
For further information visit: www.igcc.org.au