A group of 12 major global investment institutions have teamed up with the University of Cambridge in a project to promote and explore long-term, sustainable investment.
They include Allianz Global Investors, Aviva Investors, First State Investments, Loomis Sayles, Natixis, Nordea, PensionDanmark, PIMCO, Standard Life Investments, TIAA–CREF, Zurich Insurance and Singapore-based Chandler Corporation.
They have formed an Investment Leaders Group that will “explore the degree to which economic, social and environmental factors can influence long-term value creation and become a more integral part of the investment process”.
The secretariat for the initiative is being provided by the University of Cambridge Programme for Sustainability Leadership.
A series of work streams will aim to “identify and test” new investment practices. The first will focus on the value of environmental and social factors in investment and the second will look at how investors could measure and communicate how these factors contribute to a more stable economy and society.
Other potential areas for study that were identified at the group’s initial meeting in May this year included active ownership, regulatory engagement, new product feasibility and fundamental research.
The new three-year project follows on from the Cambridge-hosted P8 Group initiated by Prince Charles, which ran from 2007-2011 and which had input from major investors including CalPERS and CalSTRS of the US, Sweden’s AP7, APG of the Netherlands, the UK’s Universities Superannuation Scheme and Danish labour market fund ATP.The launch of the group coincides with the publication of a major new report from the Stranded Assets Programme at Oxford University’s Smith School of Enterprise and the Environment, prompted by the fossil fuel divestment campaign spearheaded by Bill McKibben’s 350.org.
Authors Atif Ansar, Ben Caldecott and James Tilbury pose the question: what does divestment mean for the valuation of fossil fuel assets?
The 81-page study concludes with a set of eight recommendations for institutional investors, companies and campaigners.
Referring to the former, it says: “As fiduciaries, managing long-term savings on behalf of their beneficiaries, endowments, pension funds and similar institutional investors have a duty to understand and respond to challenges posed by the fossil fuel divestment campaign – whether considering fossil fuel divestment or not.”
Recommendations for investors:
1. Closely monitor fossil fuel exposure.
2. Stress test portfolios for potential environment-related risks that could impact fossil fuel companies.
3. Be explicit about strategy on fossil fuel investment and consult with beneficiaries.
4. Engage with the management of target firms.
5. Understand the costs of divestment.
6. Engage with peers and market participants: large investors can shape market norms.
7. Engage with the media.
8. Those that commit to divestment should consider re-directing investment to renewable energy alternatives.