AODP finds more climate risk awareness, action among investors

There is far greater recognition of climate-related financial risk among asset managers than asset owners, but leadership on climate change still mainly comes from the latter group, according to a report from the Asset Owners Disclosure Project (AODP).

Publishing its fifth annual benchmark study on how investors address climate risk, the non-profit organisation said that a clear majority of the world’s biggest investors were taking action on climate change and rapidly scaling up action to protect their portfolios.

It said that 60% of the world’s 500 biggest asset owners recognised the financial risks of climate change and opportunities in the transition to a low carbon economy and are taking action. This marked an increase of 18% from the AODP’s 2016 results.

The world’s 50 biggest asset managers were “taking climate risk even more seriously”, according to the AODP.

This year was the first time that the organisation included asset managers in its assessment. The top firms were “well ahead of their asset owner clients in their approach to managing the financial impact of climate change on investment portfolios”, the AODP said.

“However, asset owners are ahead in leading the way on climate risk, with 7% in the Leaders group versus 4% of asset managers,” it said.

Asset manager subsidiaries of asset owners were the most progressive, accounting for nine of the top 10 asset managers, and in some cases surpassing their parents in the rankings, the AODP noted.

The AODP scored asset owners and managers on three key capabilities – governance and strategy, portfolio carbon risk management, and metrics and targets – and graded them from AAA (“Leaders”) to D, with an X category for “Laggards” when no evidence of action was provided.

There were far fewer asset managers in the latter category (6%) than asset owners (40%).

The only asset manager to earn a AAA rating was APG, the €443bn asset manager and provider for the large Dutch civil service pension scheme ABP. Finnish pension insurer Ilmarinen shot up the ranking, climbing 214 places to claim a top 10 spot as a result of new policies, such as linking manager incentives to sustainability goals.

Other selected findings from the study included:

  • Almost twice as many asset owners as last year incorporated climate change into their policy frameworks;
  • Only 6% of asset owners assess the risk of stranded assets;
  • In the US, 63% of asset owners were ignoring climate change;
  • 25% of asset owners were investing in low-carbon assets such as green bonds and low carbon indices, a 58% increase from last year; 
  • 34% of asset managers invest in low-carbon assets, but only $95bn is quantified;
  • 73 asset owners (15%) incorporated climate risk factors into their asset manager selection process, a 30% increase on last year;
  • 20% of asset owners were embedding climate change risk management into asset manager agreements, up from 12% in 2016.


RankAsset Owner2017 Rating2016 Rating2016 RankingAUM US$mCountry
1Local Government Super (LGS)AAAAAA27,422Australia
2The Environment Agency Pension Fund (EAPF)AAAAAA13,928UK
3New York State Common Retirement Fund (NYSCRF)AAAAAA5178,600US
4First State SuperAAAAAA1241,560Australia
9Ilmarinen AAAD22238,947Finland
10Elo AAACC7822,291Finland
11Fonds de Réserve pour les Retraites (FRR)AAAAA1639,527France
12Church Commissioners for EnglandAAAAAA10=10,334UK
14Etablissement de retraite additionnelle de la Fonction Publique (ERAFP)AAAA10=28,036France
15New Zealand Superannuation Fund AAAD10921,453New Zealand
17United Nations Joint Staff Pension Fund AAAAA2053,802US
RankAsset Manager2017 RatingAUM US$mCountry
1APG Asset Management AAA441,630Netherlands
2Legal & General IMAA1,140,418UK
3Aviva Investors BBB457,295UK
4M&G Investments BBB338,488UK
6Allianz Global Investors BB532,785Germany
7Natixis Global Asset Management BB871,066France
8AXA Investment Managers BB752,103France
9Deutsche Asset Management B796,409Germany
10HSBC Global Asset Management B413,413UK

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