The Institutional Investors Group on Climate Change (IIGCC), the European investors’ forum for collaboration on climate change, recently published its second annual report which audits the investment practices of signatories to the Investor Statement on Climate Change. The report, conducted by Mercer, highlights significant progress on climate change, made in 2008, among asset owners and asset managers, who in total represent €2 trillion in assets under management. The research shows that institutions are paying greater attention to climate change, with 75% of asset owners and over 80% of asset managers referencing climate change in their investment policies.
Asset owners are placing greater pressure on external managers to take account of climate change, with one in two now questioning their managers as to the process for integration within investment research, decision making and shareholder engagement. This is up from 30% just a year ago. Furthermore, 60% of asset owners specifically consider the extent to which climate change is fully integrated into the investment process when appointing a new manager, and 70% are monitoring their respective managers’ performance on climate change. Despite these positive developments, the number of pension funds instructing their advisors to consider climate change in their recommendations is lower at 40%.
“That institutional asset owners’ play a highly significant role in encouraging change in investment managers has never been in doubt, but what we can see from this research is that a majority of respondents are demonstrating leadership in this area; this a trend which we expect will become more pronounced in the future,”said David Russell, co-head of Responsible Investment at the Universities Superannuation Scheme (USS). “Asset owners in the survey are taking ownership of the issue, both acting directly and encouraging their asset managers to consider the risks and opportunities that climate change poses,” he added.
The report indicates that 90% of asset managers are engaging directly with companies on a wide range of climate-related issues, such as senior management responsibilities for climate change, integration into business strategies and improving corporate disclosure. However, investors need to pay more attention to encouraging companies to make absolute emission reductions. In this respect, strong signals that governments are taking this issue seriously would again help to reinforce the message that companies need to prepare themselves for future policy action.
