The Asset Owner Disclosure Project (AODP), the UK-based group climate campaign group, has received the backing of Christiana Figueres, the Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), the UN’s most senior climate change figure.
It comes as the $52.7bn (€48.1bn) United Nations Joint Staff Pension Fund (UNJSPF), criticised by some in the responsible investment sector for a perceived lack of action on climate change, has dramatically boosted its ranking in the AODP’s new Global Climate 500 Index.
The UNJSPF has just fallen short of the top 20 leading asset owners on managing climate risk in the new ranking – up from a mediocre ranking among the laggards in 2014.
The index ranks the 500 biggest pension, insurance and sovereign wealth funds on their management of risks associated with climate change. It measures transparency, risk management, low-carbon investment, active ownership and incentive chain alignment.
Figueres said the index was an important tool to encourage investors to support a low-carbon economy. She said: “The AODP Global Climate 500 Index provides a valuable insight for investors and shareholders on who in this key sector is moving forward. It spotlights those funds embracing transparency and disclosure as a first critical step, alongside those pension funds who are going even further and shifting the mix of their portfolios to ever green, cleaner ones.”The UNJSPF also got an A grade and is the biggest riser in the 500 Index, ranking at No. 21 this year from the 100s, with a D grade, in 2014.
Last year, the UNJSPF told RI that it was exploring opportunities to make environmentally responsible investments, after UN Secretary General Ban Ki-moon called on pension funds to move away from fossil fuels to cleaner energy.
The UNJSPF said it had quantified the fossil fuel exposure of its equity holdings, which represent 61% of the fund, and found its carbon exposure is 8.3% less than that of the fund’s MSCI All Country World Index benchmark. And, in December, it emerged that the fund had backed two new low carbon exchange traded funds from asset management giants BlackRock and State Street.
Australia’s Local Government Super topped the AODP leader board this year, followed by Norway’s KLP and US pension giant CalPERS. They were among nine asset owners given the top AAA rating by the AODP, four more than last year.
Funds rated A or higher in the index are protecting their investments by engaging with the companies they own, divesting of heavily carbon-exposed assets, or deploying hedging strategies.
Earlier this month the AODP and environmental law firm ClientEarth formally announced a project called the Climate and Pensions Legal Initiative (CPLI). It will work with pension fund members to challenge trustees and managers to fulfil their legal duty to protect investments from climate risk. Link to AODP report.