Investor climate group chief MacDonald says ignoring climate science a breach of fiduciary duty

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Pension funds and asset managers ignoring climate science is akin to not heeding expert legal advice and represents a breach of fiduciary duty to beneficiaries and clients, according to Donald MacDonald, Chairman of the Institutional Investors Group on Climate Change (IIGCC), the European investor body with 100 members representing over €10trn in assets.

MacDonald, the ex-Chair of the Principles for Responsible Investment (PRI) and a trustee at the BT Pension Scheme, warned against ignoring the work of the Intergovernmental Panel on Climate Change (IPCC), which he sees in the same way as any other expert advice.

“If we decided to ignore the IPCC, beneficiaries may deduce we’ve breached our fiduciary duty,” he told an event in Edinburgh organised by UKSIF in collaboration with the PRI.

As if to bolster his point, French insurance and asset management giant AXA coincidentally revealed that its Management Committee recently had a presentation from IPCC Vice Chairman Dr. Jean Jouzel, the renowned climatologist and glaciologist, on the “bare facts of climate change” and the role of insurers to both protect and provide solutions.

MacDonald cited the comments of Bank of England Governor Mark Carney on the risks of stranded assets and said: “We as asset owners and asset managers need to develop a very clear narrative and get institutional investors’ voice heard by policy makers.”Until recently that voice had not been heard “in the corridors of European power”, although that had changed recently with measurable progress on issues such as the EU Emissions Trading Scheme.

He called for more leadership from chairs, CEOs and chief investment officers at financial organisations. And he was critical of what he termed “propaganda” and dirty tricks from industry organisations. He issued a plea for a global price for carbon, saying, “that’s where we should be putting our resources”.

It comes as the IIGCC and its partner organisations in the US and Australia/New Zealand – under the Global Investor Coalition on Climate Change (GIC) banner – have published a new guide: Climate Change Investment Solutions – a guide for asset owners. It outlines a range of strategies and solutions investors can use to address climate change, including on investment, engagement, and the management and reduction of carbon exposure in portfolios.

And, elsewhere, Carbon Tracker, the NGO which has done much to put unburnable carbon on the institutional investment radar screen, has issued what amounts to a blueprint for managing climate risk in an energy transition. The thrust of the roadmap paper puts the onus on fossil fuel companies to respond to how growing climate regulation, advances in cleaner technology, cheaper renewables, and greater energy efficiency hit demand and the implications those global trends have for commodity prices.