Four in five asset owners see climate change as risk or opportunity for investment portfolios, study show

Most investors have maintained, or increased, their commitment to taking climate change into account when investing, even as the eurozone crisis, slowing growth and other global issues cloud the economic outlook, according to a joint report by global climate change groups.

Some 83 percent of asset owners and 77 percent of asset managers see climate change as a ‘material risk or opportunity’ when planning their investment portfolios, according to the report.

About 67 percent of asset owners and 78 percent of asset managers say they also reference climate risk in their investment policies.

‘Institutional investors are becoming increasingly concerned that climate change poses a serious challenge to their investments,’ write the report authors.

‘Despite growing evidence produced by climate science, global emissions continue to increase, and national and international policy responses remain inconsistent. Thus the urgency of action by investors, companies and policymakers on climate change continues to grow.’

The report was jointly published on July 25 by the US’ Investor Network on Climate Risk (INCR), Europe’s Institutional Investors Group on Climate Change and the Investor Group on Climate Change of Australia and New Zealand.

The survey, carried out by Mercer, includes responses from 42 asset owners and 51 asset managers who control more than $12 tn in assets.

The report also concludes that climate change has prompted 26 percent of asset owners to change their investment strategies or affected their decision making, and that 78 percent of asset owners take climate change issues into consideration – as one of many factors – when selecting fund managers.

The main potential profit-making opportunities in the field of climate change cited by asset managers and owners include investment in clean energy, energy efficiency and sustainable timber harvesting, the report concludes.

Some 63 percent of asset managers and 62 percent of owners say they invest in climate change solutions, mainly through equity purchases.

Australia-based asset owners are more likely than others to monitor their asset managers for performance related to climate issues, with 63 percent saying they do so, according to the survey results.

In North America, 57 percent monitor their managers for climate change issues while only 41 percent of Europeans do so. But only 18 percent of asset owners lay out a clear set of expectations for asset managers regarding climate change.

Investment in listed equities is the main area in which asset owners and managers consider climate change criteria, according to the report.

But managers and owners are also monitoring real estate, infrastructure and fixed income investment for relevance to climate change, the report notes.

‘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,’ says Christopher Davis, director of investor programs at Ceres, the Boston-based sustainability leadership group that coordinates the INCR, in the press release announcing the study.

‘This summer’s extreme drought conditions, which are causing huge economic ripples across the US economy, are the latest example of why investors should be making climate change a core consideration in their decision making.’