GLOBAL - Pension funds and other asset owners are increasingly looking for asset managers to incorporate climate change policies into their investment practices, a new survey of investors with some $12trn in assets shows.
The survey of investors and asset managers on climate change was carried out by Mercer and commissioned by the Institutional Investor Group on Climate Change (IIGCC), the North American Investor Network on Climate Risk (INCR) and the Australia/New Zealand Investor Group on Climate Change (IGCC).
The report found pension funds served as a key driver behind changes to asset managers' investment practices. Over three-fourths (77%) of asset owners considered whether or not their managers integrated climate change into their policies. However, only 18% of institutional investors have a formal process in place to assess new managers.
Ole Beier Sørensen, chairman of the IIGCC and head of research and strategy at the Danish pension fund ATP said: "It is encouraging that climate change is becoming a more strategic issue with the majority of asset owners and asset managers. They increasingly view climate change as a material investment risk/opportunity. However, to address the risks and opportunities arising from climate change, investors must have the tools to take meaningful action.
More than anything investors need stable and transparent policy frameworks which provide clarity and certainty. A number of countries and regions are moving in the right direction, but there is still a long way to go. Policy makers need to remove barriers to low carbon investment and they need to create a relatively predictable price on carbon."
National policy is one of the reasons US investors seem to lag behind those in Europe, Australia and New Zealand.
The report says: "As a result of stronger climate policy in the EU, specifically in relation to carbon pricing and renewable energy policy, there is greater integration of climate change across the portfolio from European investors. In Australia the lack of carbon pricing system and a less certain regulatory environment is a concern, although there is an increasing focus from investors on policy advocacy and addressing the physical impacts of climate change.
In the US the lack of coherent climate policy means investors are focused on engaging with companies, particularly with regards to improving disclosure, rather than integrating climate change into valuations or actively encouraging investment managers to do so."
The release of the report comes just days after more than two dozen major institutional investors in the US asked the Russell 1000 companies to actively embrace the "new reality" of ESG risks.
In a jointly-signed letter, investors including the California Public Employees Retirement System and California State Teachers' Retirement System - as well as Calvert Asset Management, Walden Asset Management, Pax World Management Corp. and Generation Investment Management - called on companies to address environmental, social and governance issues in both their actions and required investor disclosures. (Global Pensions; 10 June 2011)
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