GLOBAL - More than half of the participants in the Mercer-led collaborative Climate Change Scenarios study are taking or planning action related to its findings, according to a follow-up report and case study entitled 'Through the Looking Glass: How partners are applying the results of the climate change scenarios study'.
Jane Ambachtsheer, global head of responsible investment at Mercer, said: "We are encouraged to see that partners have clearly made efforts to understand and act on the findings from our climate change report.
"As expected, priorities and areas of focus differ among the partners, and, in some cases, the findings have been used to support decisions that were already under consideration, such as an enhanced allocation to infrastructure investments.
"The outcomes from the recent climate negotiations in Durban suggest strong, internationally coordinated action on climate policy is some ways off, with a new binding agreement not expected to be in place until 2020. This delayed action positions climate policy as a significant investment risk for the foreseeable future."
Among the 12 investors - with almost $2trn (€1.6trn) in assets under management - that participated in the follow-up survey, key findings include:
• More than half of project partners have decided to include climate change considerations in future risk management and/or strategic asset allocation processes
• 50% of project partners have undertaken or plan to make changes to their actual asset allocations
• 80% of partners have or will increase their engagement on climate change with companies and policymakers
• One-third of project participants have begun to allocate or plan to allocate more to climate-sensitive assets, identified in the report as real estate, infrastructure, private equity, listed and unlisted sustainable equities, efficiency/renewables and commodities including agricultural land and timberland
• More than half of participants either have reviewed or plan to review climate risks within climate-sensitive asset classes identified in the report
Anne Simpson, senior portfolio manager for corporate governance at the California Public Employees' Retirement System, said: "CalPERS has identified and adopted climate change as a priority theme, and we are implementing a number of actions that are consistent with the findings of the study."
Findings from the Looking Glass report show that many investors are still internally digesting the research from the initial report. Participant education of boards on the report's conclusions and policy implications is currently about 50% complete.
Many partners indicate that, in the near term, they are focused on training asset class teams about the study, as well as leveraging the asset class and regional-level findings in order to develop a deeper understanding of climate change risks and opportunities in existing and future investments and engagements.
The report was issued as part of the Investor Network on Climate Risk Meeting (INCR) and Investor Summit on Climate Risk and Energy Solutions, held today and tomorrow in New York.
The initial 'Climate Change Scenarios: Implication for Strategic Asset Allocation' report was issued by Mercer in February 2011.
It analysed the potential financial impacts of climate change on investors' portfolios, identified through a series of four climate-change scenarios playing out to 2030.
A full copy of the Through the Looking Glass report can be found here.