GLOBAL – Institutional investors should start measuring, disclosing and reducing greenhouse gas (GHG) emissions associated with their investments and portfolios to reduce policy, regulatory and financial risks associated with these emissions, according to a new Investor Briefing by the United Nations Environment Programme Finance Initiative (UNEP FI).
At the event to launch the report in London, Nick Robins, head of HSBC's Climate Change Centre of Excellence, said it was the right time to produce the report, as policies produced peaked in 2012, expectation of investor transparency and accountability was greater than ever before and there was an increasing global push to mandatory reporting.
According to the briefing, the build-up of GHG policy is likely to accelerate in coming years as the meteorological effects of climate change continue to intensify with increasingly disruptive impacts on communities and economies.
Advocacy groups, civil society organisations and other stakeholder groups (including investment beneficiaries) are demanding that investors start measuring and disclosing the GHG emissions embedded in their portfolios, and that they take actions to reduce them over time.
Gianluca Manca, head of sustainability at Eurizon Capital, and co-chair of the UNEP FI Asset Management Working Group, said: "Information on the carbon intensity, performance and climate risk exposure of thousands of companies is now publicly and readily available.
"But unless we reach a similar level of transparency among investors, we won't know whether that information is used or not, nor whether it is helping to deliver the low-carbon economy."
Julie Gorte, senior vice-president for sustainable investing at Pax World Management and co-chair of UNEP FI's Asset Management Working Group, added: "Avoiding catastrophic climate change will require action by governments and the private sector. Investors can play a key role in re-allocating capital to the low-carbon economy at the needed scale.
"The gradual decarbonisation of investment portfolios is critical for the transition to a low-carbon economy – importantly, it does not have to be inconsistent with investors' fiduciary responsibilities."
The briefing was developed jointly by UNEP and a group of investors, including Allianz, Aviva, Hermes, HSBC, Eurizon Capital, Inflection Point Capital, Pax World Investments, Robeco SAM and Trillium Asset Management.
It argues that carbon foot-printing is one of several key tools investors should use to understand, assess and mitigate portfolio carbon risk.
The briefing also lays the foundations for the development of a new market standard to measure and report financed emissions.
UNEP FI is collaborating with the Greenhouse Gas Protocol, the global standard for GHG accounting and reporting, to develop guidelines tailored to the needs of investors and other financial intermediaries.
In other news, the Threadneedle Low-Carbon Workplace Trust (LCW) has secured two local authority pension scheme equity commitments – from Flintshire County Council on behalf of the Clwyd Pension Fund and The Environment Agency Active Pension Fund.
Dawn Turner, head of pension fund management at the Environment Agency, said: "The evidence is growing that, over time, more environmentally conscious buildings will experience higher net income growth and be viewed as lower risk and thereby deliver higher returns.
"If environmental issues are set to affect the current and future value and performance of property assets, then the environmental performance of property assets must be seen as a fiduciary as well as a social responsibility for pension funds.
"As active members of the Institutional Investors Group on Climate Change and supporters of the Global Real Estate Sustainability Benchmark, we are very pleased that the first new commitment under our new real asset portfolio is an investment in LCW."
LCW is a partnership between Threadneedle Investments, commercial real estate developer Stanhope and the Carbon Trust, an organisation helping businesses, governments and the public sector to accelerate the move to a sustainable low-carbon economy.
UK pension funds are increasingly embedding social, environmental and economic considerations of climate change into their investment philosophy, with total UK managed assets in sustainability-themed investments now estimated at £7.5bn (€8.7bn), according to Eurosif's European SRI Study 2012.