Asset Owners Disclosure Project

Climate Change Best Practice

Climate change is perhaps the largest single threat to pension and superannuation funds’ long-term returns. The ability of these funds to build capability in the management of climate change risks and opportunities is therefore becoming core to their business. Not only is it certain that this capability will be required over the long-term but it will become a determining factor in both the risk/return profile of the investment portfolio and also the fund’s position in the market place relative to its peers.

The Climate Change Best Practice Methodology is a step-by-step guide and toolkit designed to assist these funds – the world’s largest investors – in designing and implementing a programme that will raise the standard of climate change management in their organisation to the highest global industry benchmarks.

aodp-iconTo start using the Methodology download it for free here.

  • Overview of the Methodology

    The Methodology is designed to assist asset owners in building capability that will improve their portfolio's long-term risk/return profile by:

    • Measuring climate change risks and opportunities within investments across all asset classes;
    • Implementing new business processes and capability for the ongoing monitoring and management of climate change risks and opportunities; and
    • Protecting the fund from a sudden climate change event which may cause a global repricing of assets.

  • How it works

    There are four phases in the Methodology.

    • Phase 1 - Climate change assessment: Assessment of the existing climate change capabilities and risk exposures. Some asset owners may begin with an assessment of their climate change capability while others may just launch straight into the project.
    • Phase 2 - Design of the fund's climate change blueprint: New policies, processes and systems are defined. Any portfolio changes required to adjusting the climate risk of the portfolio are identified. 
    • Phase 3 - Implementation of new business processes: New business processes are implemented, staff training and education takes place, information systems are configured and the processes for managing climate risk and opportunity are implemented.
    • Phase 4 - Project completion and ongoing management: Processes and standards are fully implemented by the asset owner and its partner organisations. The changes are closely monitored to ensure they are fully integrated into the day-to-day running of the portfolio.