Most fund managers are not factoring climate trends into their short- and long-term investment decisions, according to a new report released by a Boston-based clean tech consortium. A preoccupation with short-term results is part of the problem, the report said.
Ceres, a coalition of investors, environmental groups and public interest organizations, sponsored the study. Author Kirsten Snow Spalding relied heavily on California’s two public pension funds — the California public employees, CalPERS, and the state teachers’ pension, CalSTRS — along with the Investor Network on Climate Risk, a national group of about 80 institutional investors, in completing the survey and analysis.
As a result of the lack of attention paid to climate issues, the report said there are “hidden risks” in the amount of trillions of dollars of investment portfolios being managed by 500 of the world’s largest asset funds. Most responses in the survey of the fund managers were collected early last year, the report said.
“The survey results highlight the lag of major financial markets to deal with climate change, even as strong state and national climate policies are being adopted globally,” said Ceres President Mindy Lubber.
“These findings make clear that the investment community is overly focused on short-term performance and ignoring longer-term business trends such as climate-related risks and opportunities. The recent subprime mortgage meltdown is a painful reminder of the fallout for investors who ignored ‘hidden’ long-term risks.”
Among the report’s highlights are:
Ceres’ report recommended that the major institutional investors “push harder” to have asset managers, consultants and others boost their attention to climate-related issues. Ceres suggested that this be done through requests for proposal, hiring procedures and in managers’ performance reviews.
As a example, the California State Teachers’ Retirement System (CalSTRS) announced as the report was released that it will “engage its active equity managers on their climate risk analysis. Specifically, CalSTRS will highlight the need for each manager to have expertise in climate change and other sustainable investment analysis and to adapt their corporate governance voting practices to address climate risks.”
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