The second ever Global Climate Investment Index demonstrating how the world’s biggest investors are managing climate risk has revealed that many of the world’s investment funds are setting investors up for massive losses through their exposure to these risks.

The Asset Owners Disclosure Project’s (AODP) 2013-14 Global Climate Investment Index clearly identifies how most of the world’s biggest investors are managing, or failing to manage, climate risk.

“This is the second survey of the world’s largest retirement funds, insurance companies and sovereign wealth funds’ actions on managing the growing financial risks to those investments posed by climate change,” Julian Poulter, Executive Director of AODP said.

“While we can see some leaders emerging, many haven’t acknowldeged their dangerous and foolhardy addiction to investments riddled with climate risk, let alone checked themselves into rehab.

“It’s pretty clear through the Index that the big laggard funds continue to be too scared to take on big fossil fuel companies, even though they know there are enormous risks through continuing investing in them.

“Investment funds must put their members’ interest front and centre but when it comes to climate risk they largely fail at the first hurdle,” Mr Poulter said.

The index was built following information requests to the world’s 1000 largest asset owners including over 800 pension funds, 80 insurance companies, 50 sovereign wealth funds and 30 foundations/endowments. Together, they manage more than US$70 trillion.

“The coming year will see the industry smoked out of its bunker to prove to members that it is actively addressing this systemic risk to their money, “ John Hewson, AODP Chair said.

“It is extremely telling that there are only 5 funds, or 1% rated AAA or higher out of the 460 rated and that there are so many X rated funds in the Index,” Mr Hewson said.

The survey again focused on five main categories – transparency, risk management, investment chain alignment, active ownership and low-carbon investment. It includes asset owners from 63 countries, in all regions of the world.

“To see big bad financiers at it again so soon after the sub-prime disaster – paying short-term commissions to rich middle men at the long term expense of workers capital – is both shocking and shameful,” Sharan Burrow, AODP board member and General Secretary of the International Trade Union Confederation said.

Other key findings of the index include:

  • Leaders are accelerating. They are all underweight high carbon investments and overweight low-carbon ones. There are only 5 funds rated AAA or higher out of 460 rated (1%) and 1000 invited to disclose and 29 rated A or above (6%) who we feel will survive a carbon crash in any kind of good shape.
  • If all Asset Owners were AODP AAA level, we would have solved climate change without the intervention of a single politician.
  • A massive 80% of Asset Owners are either D rated (abysmal) or X rated (doing zero, nil, nothing). This list provides beneficiaries and civil society with a massive target whilst continuing to pressure the remainder.
  • Funds who did nothing different from last year are already going backwards as the risk increases each year.