EUROPE - A group of four UK-based pensions institutions has launched a project which it hopes will help create a framework for assessing the risks and opportunities of investment related to climate change.

The UK's second-largest pension scheme Universities' Superannuation Scheme (USS), with assets of £30bn (€37.5bn) and fifth-largest scheme RailPen Investments, worth £18bn, have teamed up with asset managers Henderson Global Investors and Insight Investment to research the implications of climate change on specific investment sectors.

More specifically, the parties will investigate, with the help of specialist consultancy Acclimatise, the impact of climate change on electric utilities, oil and gas, real estate and water utilities' investments and try to ascertain what tools may need to be developed to help investors and companies understand the potential risks, said David Russell, co-head of responsible investment at USS.

"Although the broad impacts of climate change are increasingly well understood, there remains many uncertainties around how it will affect specific sectors and companies. We need more and better information about these specific impacts in order to make informed decisions as to how we allocate our capital," added Russell.

Similarly, any evidence they gather can then be used to lobby corporates and governments to ensure climate change risks are incorporated into investment analyses and decision-making, said Frank Curtiss, head of corporate governance at RailPen Investments.

"The ultimate aim of this work is to contribute to the generation of better long-term and sustainable investment performance. It will also provide a basis for investors to engage actively with companies on how they are managing the issue," said Curtiss.

Initial details of the UK project have been revealed in a report entitled Managing the Unavoidable: Understanding the investment implications of adapting to climate change.

However, this is not the first such project as ABP - the Netherlands' largest pension fund with €220bn in assets under management, announced in December it was creating a large-scale "cross-departmental research exercise", according to the scheme's head of sustainability Rob Lake, to try to understand the commercial opportunities and risks of climate change. (See earlier IPE story: ABP reviews energy investments)

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