Climate change ‘firmly established’ as a material risk for investors

The European Institutional Investors Group on Climate Change, the North American Investor Network on Climate Risk, the Australia/New Zealand Investor Group on Climate Change and the Asia Investor Group on Climate Change have published a report detailing the investment practices of asset managers and asset owners such as pension funds, relating to climate change.

Findings from the report show that assessments of climate risk are directly influencing investment decisions.

The report found that 53% of asset managers decided to divest or not invest in listed equities based on climate change concerns, while a majority of asset owners (69%) said that climate change integration influenced their fund manager decisions in 2012.

These results showed a significant increase on the 43% who declared the same last year.

An increasing number of asset owners (63%) also said they are monitoring their existing asset managers on how they integrate climate change into their investment processes, which is a 10% increase on last year.

The report also found that a majority have conducted formal or informal climate risk assessments of their portfolios.

However, the report highlights a number of challenges investors face despite encouraging signs of progress in the assessment of both low carbon and emission intensive exposures.

These include a lack of clarity on which investments should be measured; patchy carbon signals; limited data, particularly for fixed interest investments and inadequate company disclosures.

European Institutional Investors Group on Climate Change’s chief executive, Stephanie Pfeifer, said: “There are some extremely encouraging findings in this year’s report. Despite the wider economic challenges, climate change is firmly established as a material risk for investors, and their assessment of climate risk is shifting investment decisions.

“However, investors still face many challenges, not least the on-going policy uncertainty which continues to make measuring long term climate risk and emissions exposure difficult.

“While clear policy signals do much to help investors measure this risk, the report shows that investors are making progress in the absence of these signals and should continue to do so,” she added.

Leigh Stringer