Investors team up for reports on climate change finance danger

Sector reports to emerge on electric utilities, oil & gas, real estate and water utilities.

Four of the UK’s biggest institutional investors, managing over £200bn in assets, are joining forces to produce a series of key reports exploring the financial consequences of what they termed “unavoidable” climate change. Henderson Global Investors, Insight Asset Management, RAILPEN Investments, and the Universities Superannuation Scheme (USS), will collaborate with Acclimatise, the specialist environmental consultancy, to look at the potential risks and opportunities in the industry sectors of electric utilities, oil & gas, real estate and water utilities. The reports, which will be published later this year, will also suggest how investors can use the climate change findings to influence the behaviour of companies in investor meetings.
Announcing the instigation of the reports, the investors said climate change was particularly likely to impact sectors dependent on large fixed assets, such as tourism, water, property, construction, energy, and infrastructure, as well as other climate-sensitive sectors, including healthcare, agriculture, forestry and insurance.
They said the risks needed to be incorporated into investment analysis and decisions because they would likely affect the timeframes over which investments are made as well as the criteria against which asset manager performance is measured.
A preliminary report released today, titled: “Managing theunavoidable: understanding the investment implications of adapting to climate change”, sets outs the framework and scope for the new research reports. Rory Sullivan, head of investor responsibility at Insight Investment, said: “While much of the discussions to date have focused on reducing future greenhouse gas emissions – and rightly so – it has not really addressed how we need to respond to the change we are already committed to. This report sets out the reasons why we as long-term investors should be concerned about climate change and outlines how we should respond, in our investment processes and in our engagement with companies and policy makers.”
Frank Curtiss, head of corporate governance at RAILPEN Investment, said: “The ultimate aim of this work is to contribute to the generation of better long-term and sustainable investment performance. It will also provide a basis for investors to engage actively with companies on how they are managing this issue.”
The investors noted that global average temperatures had increased by 0.7 degrees celsius (oC) over the past century and are now rising by 0.2oC per decade. They said that research from the Intergovernmental Panel on Climate Change (IPCC), suggested rising greenhouse gas levels could push temeperatures much higher, ranging from 1.8oC by the end of the century.
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