Climate Risks: Is Your Money Manager Paying Attention?

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


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.”

Alexis Krajeski, associate director of governance and sustainable investment at London-based F&C Management Limited, one asset management group that is factoring in climate, outlined the three areas her firm examines in assessing risks and opportunities. Her company looks closely at high emitting companies that will need to reduce emissions, those that will be impacted by shifts in consumer demand, and those, like insurers, that will be exposed directly to the impacts of climate change.

Ceres, for its part, has been leading the effort to force companies to include climate risks as part of normal disclosure rules. The group works with investors, businesses, and environmental groups. In November, they brought 20 major institutional investors together to urge the Securities and Exchange Commission to develop guidelines to help businesses account for climate-related factors that will affect their bottom lines. Lubber said she has been told that the SEC is in final stages of preparing that kind of guidance for companies, and expects to see guidelines announced in the coming months.

While many companies seem to be waiting for a law limiting carbon to start accounting for costs, Lubber pointed out, there are still significant risks to businesses outside of those stemming from legislation. “There’s no doubt that the right market signal needs to come from Congress, with a cap on carbon and a price on carbon. That would have the most impact,” she said. “But without that, the financial and material risks still exist.”

“The bottom line is clear–companies, investors, and the rest of capital markets need to respond to the ever-increasing business risks and opportunities presented by climate change,” said Lubber.

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

AN IMPORTANT UPDATE

We’re falling behind our online fundraising goals and we can’t sustain coming up short on donations month after month. Perhaps you’ve heard? It is impossibly hard in the news business right now, with layoffs intensifying and fancy new startups and funding going kaput.

The crisis facing journalism and democracy isn’t going away anytime soon. And neither is Mother Jones, our readers, or our unique way of doing in-depth reporting that exists to bring about change.

Which is exactly why, despite the challenges we face, we just took a big gulp and joined forces with the Center for Investigative Reporting, a team of ace journalists who create the amazing podcast and public radio show Reveal.

If you can part with even just a few bucks, please help us pick up the pace of donations. We simply can’t afford to keep falling behind on our fundraising targets month after month.

Editor-in-Chief Clara Jeffery said it well to our team recently, and that team 100 percent includes readers like you who make it all possible: “This is a year to prove that we can pull off this merger, grow our audiences and impact, attract more funding and keep growing. More broadly, it’s a year when the very future of both journalism and democracy is on the line. We have to go for every important story, every reader/listener/viewer, and leave it all on the field. I’m very proud of all the hard work that’s gotten us to this moment, and confident that we can meet it.”

Let’s do this. If you can right now, please support Mother Jones and investigative journalism with an urgently needed donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate