Almost half of asset managers worldwide are ignoring climate change when it comes to making decisions, survey shows

News - Living

Written by Ray Clancy

Friday, 08 January 2010 10:30

Nearly half of global money managers are making investment decisions without factoring in risks or opportunities associated with climate change, it is claimed.
A survey of the world’s 500 largest asset managers by Ceres, a Boston based coalition of environmentalists and investors, found that 44% did not consider climate risks in their investment decisions. They did not see risks as financially material.

Industries that face the most financial risk from climate change and current and future limits on greenhouse gas emissions include electricity generators, automobile manufacturers and insurance companies, it found.

Asset owners, such as pension funds and other institutional investors, were not asking their asset managers to analyze the risks, or were only just beginning to raise the subject, the research shows.
‘Despite the growing recognition of the far-reaching impacts climate change will have on the global economy, only a handful of asset managers are integrating climate risks and opportunities throughout their investment practices,’ said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk.
‘These findings make clear that the investment community is overly focused on short term performance and ignoring longer term business trends such as climate related risks and opportunities,’ she added.

A key problem identified in the report is that asset owners, such as pension funds and other institutional investors, are either not asking their asset managers to include climate risk and opportunity analysis, or are only beginning to raise the subject.

Another shortcoming identified in the report is that incentive structures and benchmarks that asset owners use for evaluating asset managers are heavily weighted towards short term performance focusing primarily on quarterly returns where climate risks are far less likely to show up.
The report recommends that institutional investors push harder to get asset managers, consultants and others in the investment community to boost their attention to climate-related issues.

Alexis Krajeski, a sustainable investment expert in London at global asset management company F&C Management, said money managers could stand to lose if they do not analyze opportunities and risks linked to climate change.
Opportunities could include investments in companies that are responding to greenhouse gas regulations by helping heavy industry to reduce emissions. ‘In order to capitalize on climate-related opportunities and avoid losses linked to climate risk, we need to identify the winners and losers,’ she said