Investors “woefully inadequate” on climate as CDP reports disclosure/performance link

CDP Chairman Alan Brown in broadside at investment community.

The investment community has been slammed for its “woefully inadequate” engagement with climate change by Alan Brown, the Schroders investment chief who chairs the Trustees of the Carbon Disclosure Project. “The level of engagement of the asset management industry is woefully inadequate in terms of quality and quantity,” Brown said on the CDP Global Forum webcast yesterday. The webcast marked the launch of the new CDP Global 500 Report 2011, which suggested a “strong correlation” between companies’ financial performance and their climate change disclosure and performance. The report found that leading firms “provide approximately double the average total return of the Global 500 between January 2005 and May 2011”. CDP CEO Paul Simpson said he’d be delighted to see the investment community look further at the correlation: “In short, stopping climate change can make you money – but we need to see that proved.” Schroder’s Brown said asset owner fiduciaries should consider wider issues than merely risk-adjusted returns, in a similar way that company directors are obliged to under the Companies Act. He said he was disappointed that clients rarely ask his firm about its engagement activities, for example. Brown was not the only panelist to express frustration with investors in the online event. Ian Cheshire, CEO of DIY chain Kingfisher, said investors were “absolutely not” engaging with his company on climate change.“They have no way of changing valuation based on sustainability,” he said. “There isn’t yet a feed-through to the portfolio manager.” He added: “The investment valuation metrics are part of the market failure. There really is a big need for the investment community to engage with this.” There were no asset owner representatives speaking on the panel, despite the fact that CDP represents more than 500 global investors with $71trn (€51.7bn) of assets. James Bevan, CIO of charity and ecclesiastical fund management specialist CCLA, said it was “critical” that investors acted together on climate change. He said investors should divest companies who don’t disclose their climate change risks. “If you’re not going to disclose you can’t be taken as a serious investment opportunity,” was his comment. Mark Makepeace, CEO of index firm FTSE, said he’d yet to see large investors pick up the climate change theme – though there was some interest and demand. “If companies know investors are engaging with them on these themes – I think that will help progress.” He added that some asset owners were starting to adapt their benchmarks to take on board climate change. Lauralee Martin, CFO of real estate firm Jones Lang LaSalle, said pension fund RFPs demanding the carbon footprint of portfolios in the property sector were, however, proving to be “powerfully effective” in moving the real estate sector forward on environmental issues.