The majority of institutional investors have fewer than two employees working on climate policy advocacy, according to new research.
Generation Investment Management’s philanthropic arm partnered with sustainability consultancy Volans on the study, exploring best practices for engaging with governments on climate change.
Responsibility for the topic usually sits within a responsible investment function, it found, with input from investment and government affairs teams.
“In a relatively small number of cases, institutions have established dedicated systemic stewardship or climate policy functions. But, more typically, climate policy engagement is treated as an adjunct to company-level engagement, with the stewardship teams that manage the latter also taking on responsibility for the former.”
Because of this, resourcing is often poor, concluded the report, and those undertaking climate policy advocacy “have limited policy expertise or experience”. In most cases, climate policy engagement is allocated to fewer than two full-time people, regardless of the size of the institution, the research found.
The study results were based on 18 months of surveys, roundtables and interviews with asset owners and managers from across the globe.
On the asset owner side, Volans noted that – as well as low resourcing — there was also a lack of “deep knowledge of market and policy dynamics at the sectoral and country level”.
“This is one reason why such institutions are often minimally engaged on real economy policy issues, but may engage on the development and adoption of global disclosure frameworks [such as the Taskforce on Climate-related Financial Disclosures or the International Sustainability Standards Board]”.
However, the research highlighted an “emerging consensus among pioneer institutions that real economy policy represents the next frontier” and that effort and resources need to shift accordingly.
“In polling conducted during roundtables with investors based in Europe, Asia and North America, participants reported that they would optimally double the proportion of their engagement resource that goes towards sector-level policies (from 14% to 27%)”, it said.
The same applies to cross-sector policy instruments, such as carbon pricing, while most wanted to more than halve their engagement on disclosure standards.
Asset owners also raised concerns about the legitimacy of seeking to influence government policy, especially for state-backed pension schemes and sovereign wealth funds.
The report called on investors to undertake “a much-needed burst of experimentation and learning-by-doing, to make sure real economy policy engagement is both adequately resourced and effectively executed”.
