With non-state actors emerging as the key to the credibility of forthcoming Conference of the Parties (COP) in Paris, the world’s largest investors must commit to total transparency in the next Asset Owners Disclosure Project’s (AODP) Global Climate Index, launched Wednesday.
The launch of AODP’s fourth global survey that collects data from asset owners covering their climate risk management comes ahead of the critical 2015 Paris Climate Conference in December, which will see nations thrash out a legally binding and universal agreement on climate.
The AODP has developed the world’s leading reporting framework for institutional investors encompassing the disclosure and management of climate risk. AODP indices are unique in evaluating the long-term climate risk and management actions of asset owners – the world’s largest pension funds, sovereign wealth funds, insurance companies, foundations and endowments.
AODP CEO Julian Poulter said: “Now we need to move beyond the talking. A group of AODP Index leaders have proved it is possible to protect their investments against a carbon crash and still make money. It’s time to focus attention on those laggards who are digging their heels in, some for ideological reasons and some out of negligence.”
Asset owners must play a major role in any effective action to mitigate climate change, he said.
“The risks are clear – Tesla has put an aggressive commercial price on the transition, renewables costs are falling and nobody can make money from mining fossil fuels anymore – it is sheer stupidity for laggard funds to risk their stakeholder’s money,” Poulter added.
The writing is on the wall regarding transparency – the leaders already fully disclose and are prepared to be compared against their peers, the French government has started the regulation ball rolling and members are demanding it. Its time to accept the inevitable and embrace this change.
AODP’s methodology is oriented around identifying material climate change risk and the processes that mitigate these risks, and does not support wholesale divestment as the only strategy to combat systemic climate change risk.
The 2015 survey found that the world’s largest investors continue to gamble on climate change by investing in heavily carbon-exposed assets, while only a small minority is blazing a trail to a safer, low-carbon world. Nearly half of the funds surveyed (232) did absolutely nothing to protect investments under their stewardship from the threat of climate change.
In an in-depth report Digging Deeper released earlier this month, AODP identified many asset owners have taken positive action to reduce the very real financial risk of investing in assets exposed to accelerating climate change. But many funds are lagging well behind what is necessary to ensure a transition to a low-carbon economy.
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