Pension fund portfolios across the globe could be exposed to hidden risks, according to a new report by US sustainability group Ceres, as only a handful of asset managers are integrating climate risks and opportunities throughout their investment practices.

In a survey involving 84 asset managers globally, it was revealed that while a large number of them are in the preliminary stages of including climate risks in their due diligence, only a small percentage are considering a broad range of climate risks, such as regulatory, litigation, physical and competitive risks. This is despite growing recognition of the far-reaching impacts climate change will have on the global economy.

In addition, as many as 44 per cent of respondents said they do not consider climate risks at all because they do not believe that climate change is financially 'material' to investment decision-making.

A further finding was that asset managers were not inclined to analyse climate risks because their investors weren't asking them to. As a result, the Ceres report recommends that institutional investors, such as pension funds, push harder to bring this issue to the attention of the investment community, for example through requests for proposals (RFPs) or as part of a manger's performance review.

On a more positive note, the report did highlight a number of managers that are integrating climate risks and opportunities throughout their investment practices, to include F&C Management and MFS Management.

Alexis Krajeski, associate director of Governance & Sustainable Investment at F&C Management, commenting on the report, said: "To achieve the climate change goals necessary to avoid catastrophic climate change, companies will need to reduce their own greenhouse gas emissions and develop products and solutions to help the world shift onto a low-carbon growth path.

"As long-term global investors, we want to invest in companies at the forefront of that change and view those lagging behind with caution. To make these assessments, we have developed requisite expertise and processes to incorporate climate-related risks into our investment decision-making. In time, we believe such enlightened investment thinking will lead to better investment performance and support the growing demand we see from clients."

To download a copy of the full survey report, entitled Investors Analyse Climate Risks and Opprtunities: A Survey of Asset Manager Practices, please visit www.ceres.org

Share Story: