Institutional investors with $2trn in assets under management have acted on the findings of a research report published last year into the strategic asset allocation decisions that could be affected by climate change.
Consultant Mercer produced both the first report in 2011 – Climate Change Scenarios – Implications for Strategic Asset Allocation – and the follow-up report – Through the Looking Glass – How Partners are Applying the Results of the Climate Change Scenarios Study – indicating just how the industry is reacting to the implications of risk associated with the issue.
Mercer said that of 12 investors representing some $2trn in AUM, involved in the follow-up, more than half have decided to “include climate change considerations in future risk management and/or strategic asset allocation processes”.
– 50% of project partners have undertaken or plan to make changes to their actual asset allocations
– 80% of partners have or will increase their engagement on climate change with companies and policy makers
– One-third of project participants have begun to or plan to allocate more to “climate sensitive assets” (identified in the report as real estate, infrastructure, private equity, sustainable equities (listed and unlisted), efficiency/renewables (listed and unlisted) and commodities (including agricultural land and timberland)
– More than half of participants either have, or plan to review, climate risks within climate-sensitive asset classes identified in the report.
Jane Ambachtsheer, global head of Responsible Investment for Mercer said: “We are encouraged to see that partners have clearly made efforts to understand and act on the findings from our climate change report. As expected, priorities and areas of focus differ among the partners, and in some cases, the findings have been used to support decisions which were already under consideration, such as an enhanced allocation to infrastructure investments.”
“The outcomes from the recent climate negotiations in Durban suggest that strong, internationally coordinated action on climate policy is some ways off, with a new binding agreement not expected to be in place until 2020. This delayed action positions climate policy as a significant investment risk for the foreseeable future.”