MOST BIG INVESTORS POORLY MANAGED FOR CLIMATE RISKS, FINDS FIRST GLOBAL CLIMATE INDEX FOR ASSET OWNERS
The first ever Global Climate Investment Index showing how the world’s biggest investors – superannuation/pension funds, insurance companies, foundations/endowments and sovereign wealth funds – are managing climate risk.
The Asset Owners Disclosure Project (AODP) today released the first ever global climate investment index showing how most of the world’s biggest investors, including pension funds, are managing climate risk.
“This first survey of the world’s 1,000 largest retirement funds, insurance companies and sovereign wealth funds’ management of climate risks shows that a large proportion of funds have their heads in the sand over climate risk,” said Julian Poulter, Executive Director of AODP.
“The survey paints a disturbing overall picture in terms of the majority failing to recognise the unique investment challenge of climate change and the dead end that the current “business as usual” represents,” said AODP Board Member Bob Litterman, who is former head of risk at Goldman Sachs in the United States.
“Climate change will be recognized soon as the real threat that it represents not only to nature as we know it on earth, but also to humanity. Funds have yet to recognize that a tipping point has been reached.”
The index was built following information requests to the world’s 1,000 largest asset owners including over 800 pension funds, 80 insurance companies, 50 sovereign wealth funds and 50 foundations/endowments. Together, they manage more than US$60 trillion.
The survey 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.
“We applaud the efforts of the leaders but even many of those provide scant information to us as stakeholders to allow us to se how they are managing our future,” said Sharan Burrow, AODP board member and General Secretary of the International Trade Union Confederation.
“As for the laggards, working people should expect more from the people who they have trusted with their retirement savings to manage the long term. These funds need to wake up to the scale of climate risk but also members need to start applying pressure to drive the change,” she added.
Other key findings of the index include:
- The ability of funds to respond to and to build capacity around climate change is not affected by size – the top fund, Australia’s Local Government Super has just over US$6 billion under management, while US-based TIAA-CREF with US$561 billion didn’t respond.
- US asset owners are particularly strong in the area of proxy voting and have tended to be much more active with raising shareholder resolutions, including those related to environmental, social and governance issues.
- European funds tended to rate well in all five categories of inquiry. They were especially strong in terms of active ownership (for instance proxy voting policies, engagement strategies and participation in collaborative initiatives) and investment chain alignment (such as remuneration structure of fund managers and developing internal resources).
- Only South Africa’s Government Employees Pension Fund (GEPF) has calculated its exposure to overstated fossil fuel reserve valuations via the balance sheets of its investee companies. For this and other reasons GEPF is ranked second and is the only other AAA rated fund.
- Asia-Pacific was the worst performing region save for the Australian influence.