EUROPE - Fund managers will have to assess the impacts of pollution and climate change in considering which companies to invest in, according to industry experts speaking at a recent conference.
With strict greenhouse gas emissions standards set by the European Union to begin in 2005 and with climactic effects increasingly affecting assets, investors must come to terms with the liabilities and opportunities on tap, said panellists at a conference sponsored by the Institutional Investors Group on Climate Change.
Sectors such as utilities and aviation will have to factor greenhouse gas emissions into their costs on the balance sheets, said Sue Livingston, director of SRI and UK equity manager at Schroder Investment Management.
Additionally, damaging weather events such as floods are causing insurers to assess their risk premium accordingly, commented Pamela Heck, climate advisor for property and casualty at Swiss Re.
On the other hand, there will be a market for carbon allowance trading as a result of the EU initiative, and companies with low carbon emissions will be able to count their extra allowances as a tradable asset.
“There will be new demand for more indirect methods of reductions -- I’m thinking of emissions trading,” Heck said.
Significant uncertainty abounds as analysts are trying to calculate the costs per carbon.
“There is low information and knowledge of how it works and what the costs and impacts could be,” said Paul McNamara, director and head of research for Prudential Property Investment Managers. “They don’t know how to value responsible performance, and that in turn impacts on valuation.”
The lack of a quantifiable cost per carbon should not hinder investors from making some assessments, however. With surveys carried out by organisations such as the Carbon Disclosure Project, which writes to the global 500 and asks for their pollution policies, investors can at least start to assess the probable impacts in the years to come, said James Cameron, chairman of the project.
Presenters emphasised that investors and fund managers need not be motivated by environmental concerns or SRI to worry about the impacts of pollution. “At the start of this year, I had no interest in climate change, but by the end of the year, I was very interested,” explained Chris Rowland, head of utilities research for Dresdner Kleinwort Wasserstein. “The right to pollute may come at great cost.”
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.