Investor action lagging principles on climate change: IIGCC

Some of the world’s most active investors on climate change have yet to translate principle into action, according to an update on their activities as signatories to the IIGCC Investor Statement on Climate Change, which represents asset owners and managers running €1.4 trillion in assets. In its first annual report on the introduction of climate change strategies, the IIGCC report said just four out of 12 of its asset owner signatories incorporated climate change factors into their requests for proposals (RFPs) to hire fund managers, as encouraged in the statement. Three said they formally evaluated what their managers are doing in terms of integrating climate change into investment decision making. In addition, only 30% have asked for consultant advice on the issue, while just one signatory had sought consultant advice on clean energy investments. The asset owner signatories represent some of the most progressive European investors on climate change. They include the Environment Agency Pension Fund and Universities Superannuation Scheme in the UK and PGGM Investments in the Netherlands. The report said one reason for the inaction is that signals being sent by government to investors on climate change issues areweak and in places contradictory, which it said was hampering investment. The IIGCC also said that many of its asset manager signatories were not taking into account climate change on investments where they can’t see a price signal, principally because of uncertainties about future government policy and its implications. As a result, it said: “Climate change is only being translated into stock pricing decisions where the impacts are material at present. One issue that is not being considered in any detail is adaptation to unavoidable climate change.”
More positively, however, the update said investors had strengthened their resolve to raise climate change as an issue in the investment process. Amongst asset owners, 8 out of 12 ask their fund managers to invest in low carbon and clean energy funds and engage with companies on climate change. Over half said they encouraged managers to integrate climate change considerations in investment analysis and decisions. All the statement’s fund manager signatories said they now asked companies to improve reporting on climate change, with just over 60% requesting concrete greenhouse gas emissions reductions.
Peter Dunscombe, chairman of the Institutional Investors Group on Climate Change (IIGCC) and head of investments at the BBC Pension Trust, said: “Investment decisions taken now will have a major effect on the world’s climate, making it imperative that investors step up their response to the climate challenge. The IIGCC’s report highlights that the investment community has come a long way in understanding and analysing the investment implications form climate change, but also that there is further room for progress from investors, companies and governments.”
Rory Sullivan, head of responsible investment at Insight Investment, said: “I think the report should be applaudedfor its honesty. What it demonstrates is that, while we’ve seen a lot of good work, for example in investors encouraging better climate change reporting from companies, we’ve yet to see that translate into hard action such as climate change related investment mandates. The lack of clear public policy is clearly one dimension of the problem. However, you also have to ask why progress has been so slow given that – using the UK as an example – it has been eight years since the amendments to the Pensions Act and that these eight years have seen a huge amount of high-level discussion about how investors should be more responsible.”
Click here to link to the report