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Investors See Climate Change as Risk That Influences Decisions

By Andrea Vittorio (Bloomberg) - August 6, 2013

Climate change remains a material risk for a majority of investors and, in many cases, it is increasingly influencing their investment activities, according to a report released Aug. 5 by a coalition of global investor groups.

About 81 percent of asset owners and 68 percent of asset managers said they view climate change as a material risk across their entire investment portfolio in the third annual Global Investor Survey on Climate Change. Most of the remaining respondents identified climate risks only for certain asset classes, such as real estate and infrastructure.

Climate change also had an impact on investment activities in 2012, with more than half of asset managers and almost a quarter of asset owners saying climate change concerns influenced their investment or divestment decisions.

The report, based on survey responses from 84 investors representing more than $14 trillion in assets, was released by the Global Investor Coalition on Climate Change. Members of the coalition include 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.

“We are pleased that global investors are continuing to prioritize climate change as a material investment risk and source of investment opportunity,” Chris Davis, director of investor programs at Ceres, said in a statement. “But much work remains to be done, especially in the U.S., to fully integrate climate risk into investment decision-making, and to advance public policies that will accelerate more low carbon investment.”

Risks for Specific Assets

More than half of asset owners conducted formal or informal climate risk assessments of their portfolios in 2012, which is the same percentage that reported doing so in 2011. Meanwhile, almost all asset managers conducted such assessments in 2012.

Among the top climate risk factors identified by asset owners and managers in the survey were regulatory changes related to greenhouse gas emissions, government support schemes, physical impacts, and corporate governance policies for climate change.

Climate risks tended to be analyzed within asset classes and for particular investments, rather than at the portfolio level, according to the report. Climate risk assessments for real estate and infrastructure portfolios, for example, “generally focused on the potential physical impacts of climate change and/or carbon emissions of specific assets,” the report said.

The report said asset owners and managers are making progress when it comes to addressing low-carbon investment opportunities and emissions-intensive assets.

About 70 percent of asset owners and 60 percent of asset managers reported low-carbon investments, such as renewables, according to the report.
Further Work Needed

Climate concerns also are increasingly leading to divestment or preventing particular investments from being made, with 23 percent of asset owners doing so in 2012 compared to 9 percent in 2011, the report said.

But “further work is needed” at the public policy and corporate level to address challenges for investors, such as a lack of clarity on which investments should be measured and “patchy carbon signals,” the report said.

The report said the majority of public policy engagements continues to come from the Global Investor Coalition on Climate Change, which represents the international investment community to policymaking bodies such as the Group of 20 governments and the World Economic Forum.