Climate Risks: Is Your Money Manager Paying Attention?
The majority of the world's leading asset managers are not factoring in climate-change in their decision-making, finds a new study from the sustainable business group Ceres. Climate change will create risk factors for some businesses and opportunities for others, argues Ceres, and smart money managers should be accounting for that.
The group surveyed the world's 500 biggest asset managers, and received responses from 84 who manage $8.6 trillion in assets. Of those, 71 percent said they currently are not factoring in climate risks when considering investments—though half said they believe that some sectors have "significant exposure to climate risks." Forty-four percent said that they don't consider climate risks at all "because they do not believe that climate change is material to their investment decision making."
Risks associated with climate change range from the direct impacts of increased severe storms, droughts, and flooding, to the cost increases of doing business if or when a price is put on carbon dioxide. But there are also opportunities for companies who are providing low-carbon solutions or otherwise adapting to the changing climate. The Ceres analysis found that most money managers are not looking very far into the future when assessing these risks and opportunities and choosing investments.
Part of the challenge the report identifies is that clients are not requesting this kind of information: 49 percent said their investor clients aren't asking them to consider this kind of risk, so they're not doing it yet. Most said, however, that they are in the preliminary stages of figuring out how to assess climate-related factors.
"The vast majority of the asset managers who responded to the survey are only in first gear on climate change," said Mindy Lubber, president of Ceres. "This is disappointing--it defies reality and the very real numbers... The survey makes clear that the investment community is still overly focused on short term performance and dismissive of long-term risks like climate change."