Fears about the effect of human activity from the climate date from the ancient Greeks, but it was not until the 1980s that scientists began to unite for action on climate change, and the warnings have only escalated since. Too often they have been ignored or denied.
Hymans Robertson has found that climate change is still not being taken seriously enough by private markets managers.
It said in a recent report that “private markets managers are failing to provide their clients with the information they need to effectively manage climate risks”.
This lack of data has significant implications for both defined benefit and defined contribution pension schemes’ ability to meet their governance and reporting obligations under the Task Force on Climate-related Financial Disclosures (TFCD).
Hymans Robertson asked the managers used by its clients for climate data. It revealed a “worryingly low level of engagement” from some, with just over two-fifths (42%) of managers providing data on all funds and a further 14% providing data on some of their funds.
Disappointingly, 44% of managers approached did not respond, raising concerns as to whether they are prepared to provide climate information, the researchers said.
The Alternative Credit Council also recently highlighted the problem of greenwashing, referring to a company’s misrepresentation of its environmental practices. While greenwashing is mostly financially driven, as it requires investment to put in place environmentally friendly practices, firms that overstate their green credentials risk litigation and reputational risk.
Between investors and regulators, asset managers are under increasing pressure to explain how they integrate ESG factors into their decision-making processes, and the metrics used to monitor ESG and manage risks within their portfolios.
Their challenge is the lack of standards for defining, measuring and reporting on ESG, leading to disparate rating methods and results.
With climate change already playing havoc with global weather systems, it is imperative for asset owners to assess climate risks and report on carbon emissions.
And this in turn means that asset managers need to work a lot harder to provide this data.
Lauren Mills, Private Markets Editor