Climate change a ‘firmly established’ material risk for mainstream investors

The majority of investors now view climate change as a “material risk”, according to a survey of asset managers and owners whose collective assets exceed $14 trillion.

The third annual Global Investor Survey on Climate Change polled over 80 major investors and found that 53% had used climate change as their motivation when investing in or divesting from certain stocks. This is a marked increase from 23% in 2012 and 9% in 2011.

The Global Investor Coalition on Climate Change, whose four regional networks co-ordinated the research, said that many investors had advanced their climate change commitments in the past 12 months.

When it comes to divestment or not selecting a particular stock because of climate change concerns, the report says this is a mainstream approach, and not one reserved solely for investors with sustainability or ethical approaches.

A European equity manager is quoted as saying, “We divested from a company when we came to the conclusion that they were no longer part of the transition to a low-carbon economy as their portfolio of carbon-based fuels/assets began to rise materially.”

Meanwhile, 69% of respondents said climate change had influenced their choice of fund manager – a figure that stood at 43% in 2012.

“Despite the wider economic challenges, climate change is firmly established as a material risk for investors, and their assessment of climate risk is shifting investment decisions”, said Stephanie Pfeifer, chief executive of the European Institutional Investors Group on Climate Change – one of the four groups behind the research.

“However, investors still face many challenges, not least the ongoing policy uncertainty which continues to make measuring long-term climate risk and emissions exposure difficult. While clear policy signals do much to help investors measure this risk, the report shows that investors are making progress in the absence of these signals and should continue to do so.”

The report uses a number of case studies to display its findings, including the Church of England’s national investing bodies, which recently came under fire for investing in the payday lender Wonga.

Impax Asset Management, which published a white paper detailing the “investment case” for divesting from fossil fuels in July, is another case study.

The investor survey follows a study by UK thinktank Carbon Tracker, which in April said 60-80% of all fossil fuels need to be left in the ground if we want to tackle climate change.

Further reading:

Investor report highlights gap between climate change and action

Report warns investors to consider financial impact of climate change

Investors demand government action to avoid dangerous climate change impacts

Asset owners are displaying ‘limited’ climate change action

The Guide to Climate Change 2013