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Powerful group of fund managers reveal increasing influence of climate risk, but stronger policy needed

06 August 2013
Powerful group of fund managers reveal increasing influence of climate risk, but stronger policy needed

LONDON: A revealing survey shows that the majority of investment decisions by a powerful group of asset managers are increasingly driven by climate risk analysis, with the group reiterating a need for stronger global climate policy in the report. 

The survey of investment practices relating to climate change was conducted by Mercer, and based on responses from 37 asset owners and 47 asset managers, who own collective assets of over US$14 trillion.

The report detailing the survey results, published by 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, reveals that the majority of investors view climate change as a material risk which influences their investment activities.

Growing climate concern

Key findings from the report include:

  • 53% of asset managers have decided to divest or not invest in listed equities based on climate change concerns
  • 83% say they consider the extent of which managers integrate climate risk into investments, with 69% saying it influences their decision-making – up from 43% last year
  • Despite continued global policy uncertainty, 25% of asset owners are making changes to their investment strategy based on climate risk analysis

Policy certainty

In November last year the same group issued an open letter addressed to governments of the world's largest economies to call for more decisive climate change policy. The need for strong climate policy remains a critical issue. Stephanie Pfeifer, Chief Executive of the European Institutional Investors Group on Climate Change, 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.”

Low carbon investment

Another key finding from the survey is that 70% of these asset owners and 60% of asset managers reported low carbon investments. On top of this, 50% of asset owners and 52% of asset managers also reported exposure to low carbon assets via developed market equity investments, which makes this asset class the highest level of reporting on low carbon exposure.

Chris Davis, Director of Investor Programs at Ceres, a US-based sustainability group coordinating the Investor Network on Climate Risk, said: “We are pleased that global investors are continuing to prioritize climate change as a material investment risk and source of investment opportunity.

"But much work remains to be done, especially in the US, to fully integrate climate risk into investment decision-making, and to advance public policies that will accelerate more low carbon investment.”

Read the report

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