GLOBAL - A majority of investors have retained and boosted their climate change investment strategies despite economic and political uncertainties, according to the latest report detailing the investment practices of asset managers and owners.
This year's "Global Investor Survey on Climate Change" revealed that investors are increasingly monitoring and assessing climate risk in other asset classes, including real estate and infrastructure.
Historically, they had focused on the listed portion of their portfolios.
It also shows that asset owners are making changes to their investment strategy or decision-making based on their assessments of climate risk, in spite of ongoing global policy uncertainty.
More than half of asset owners stated that they conduct a climate risk assessment, with one quarter making changes to their investment strategy based on their assessment of climate risk.
Stephanie Pfeifer, executive director of the Institutional Investors Group on Climate Change, said: "It is encouraging that, despite the turbulent economic climate, investors have retained and in many cases built upon their engagement process relating to climate change.
"It is also important that investors embed climate risk assessments within investment decision-making processes, something they are now beginning to do.
"For progress to continue to be made, policy frameworks, which stimulate low-carbon investment and provide investors with the tools to take further action, will remain critical.
"Strong and stable policy also helps investors adequately to assess, quantify and therefore manage climate change risks alongside separate short-term risks."
But Christopher Davis, director of investor programmes at Boston-based sustainability leadership group Ceres, which coordinates the Investor Network on Climate Risk (INCR), added: "While it is 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.
"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."
Other key findings include:
• All asset managers stated that climate change issues are assessed, with the majority of asset owners (80%) conducting this analysis.
• A majority of asset owners (78%) consider climate change integration in manager selection, but mandates are rarely awarded solely on the basis of climate considerations. More than half (57%) of asset owners conducted formal or informal climate risk assessments of their portfolios.
• Asset owners are increasingly focusing on monitoring existing managers on climate issues, with 53% of owners undertaking this activity.
• The majority of respondents - 76% of asset owners and 82% of asset managers - provide some form of climate risk reporting, although levels of public reporting were lower.
• The European Institutional Investors Group on Climate Change, the INCR and the Australia/New Zealand Investor Group on Climate Change continue to facilitate the majority of public policy engagement for investors, with 80% of asset managers and 83% of asset owners stating that they predominantly use the networks for public policy engagement.
• A price for carbon is reflected in company evaluations where relevant - for example, with European utilities - but, given the low value currently attached to carbon, the impact is generally immaterial.
There continues to be variation in progress regionally, with European and Australian investors leading their counterparts in North America with respect to overall engagement in addressing climate change.
This should not obscure the fact that large US funds are undertaking some noteworthy work, especially in regard to direct company engagement through shareholder resolutions.
Nathan Fabian, chief executive at the IGCC, said: "Investors are responding positively to climate policies and to market signals and, as a result, are more deeply assessing climate risks in their portfolios.
"The challenge facing investors remains how to change investment allocations to position for worsening climate risks that are not fully captured in the current policy and market signals."
The report was conducted by global consultancy Mercer and published by the IIGCC, the INCR and the IGCC.
It is based on survey responses from 42 asset owners and 51 asset managers, with collective assets totalling more than $12trn (€9.9trn).
The full report can be found here.
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