Fossil Fuels

Published on May 4th, 2016 | by Joshua S Hill

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Nearly Half Of World’s Biggest Investors Are Ignoring Climate Risk Completely

May 4th, 2016 by  

Nearly half of the world’s 500 biggest investors are ignoring climate risks completely, according to a new report from the Asset Owners Disclosure Project.

According to the fourth edition of the Asset Owners Disclosure Project’s (AODP) Global Climate 500 Index (PDF), published late last month, 246 of the world’s 500 biggest investors, accounting for $14.3 trillion in funds, are ignoring climate risks completely.

The report covers investors who together account for $38 trillion in investment funds, but only a fifth of the total, 97 investors, representing $9.4 trillion, “are taking tangible action to mitigate climate change risk.” 2015 did see a lot of movement in investors making moves towards accounting for climate risks, and the report notes that another 157 investors worth $14 trillion are taking the first steps towards support for shareholder resolutions and low carbon investments.

“Climate change risk is now a mainstream issue for institutional investors and last year has seen many significantly step up their action to manage this,” said Julian Poulter, AODP CEO. “However, only a handful are protecting their portfolios from the very real danger of stranded assets, and it is shocking that nearly half the world’s biggest investors are doing nothing at all to mitigate climate risk. Pensions funds and insurers that ignore climate change are gambling with the savings and financial security of hundreds of millions of people around the world and risking another financial crisis.”

The authors of the report note that “Climate change is now a mainstream issue for institutional investors and last year has seen many significantly step up their action to manage this.” According to the report, these leaders, rated A to AAA, have grown 29% from 24 to 31 investors. On average, the report’s 12 AAA-rated institutions have outperformed the benchmark return over five years, “demonstrating that climate risks can be managed without sacrificing returns.”

The biggest improvement was seen in asset owners who are still developing their climate risk strategy, which saw a 52% increase in those rated C to CCC.

Number of Asset Owners by Rating Groups

AODP-1

The authors of the report conclude that “Momentum is building in the industry and there are many more asset owners embarking on the journey. 51% of the index are now taking some action in managing investment climate risk, which is a positive outcome.” However, the fact that nearly half the index remains X-rated — with no evidence they are taking any action at all — is a looming reminder of the work that still needs to be done.





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About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



  • Kraylin

    I don’t entirely disagree that now is a good time to divest from traditional energy portfolios however articles like these basically stating all these investors are morons I think says more about the author than the investors… I understand the agenda just not the blanket statement.

    Quite obviously there is still literally trillions of dollars to be made over the next 50 years while we continue to use Fossil Fuels AND continue the slow transition to renewable energies. I know many people, myself included, wish we could click our heels together and stop using fossil fuels, but the less delusional among us know that transition is going to take a very long time. In the mean time, we are going to need A LOT of energy, in traditional forms…

    • Michael Gentry

      A very long time? How much time do you think we have?

      • jeffhre

        Yep, in just a few years, 50 more years at this scale of use will be seen as delusionally optimistic for fossil fuel supporters.

      • Kraylin

        Your response is typical of a climate (activist? entusiast? supporter?). Don’t get me wrong, I am not suggesting that we SHOULD take our time, I am simply being realistic that no matter how extreme our efforts it is going to take a long time to transition from fossil fuels. In the mean time, plenty of people, including all the employees etc will continue to make trillions of dollars from fossil fuels…

    • Brooks Bridges

      Unfortunately, the physics and chemistry of the atmosphere have their own timeframe. We could obviously transition to a WWII level effort and greatly speed up transition.
      Meanwhile: Absurdly high winter temps gave record low Arctic sea ice this year – potential for ice-free this summer. Loss of ice affecting weather over huge parts of world. Temps in Alberta 35 deg F above normal, high winds fueling fire that has just about destroyed a town of 100,000. Africa, India having severe drought – water trains in India. Paraphrasing Elon on climate refugees: You ain’t seen nothing yet.

  • Matt

    Another reason that a carbon fee/dividend system to add external cost into fossil fuel is needed so badly. Too many investors, companies, fund managers only consider maximum proof, as long as they don’t break too many laws. Until externals are included in the market, they will continue to “Play while Rome burns”. So will even claim it is their job to ignore climate risk and max returns now.

  • Dan

    What happened to the sharing function? Could my phone be causing this? I used to enjoy sharing Cleantechnica articles on Facebook, but am not able to, nor have I been able to for a few days at least. This article deserves a good share…

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