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

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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