GLOBAL – A large number of pension funds continue to ignore the risks their investment portfolios face over climate change, according to the Asset Owners Disclosure Project (AODP).

AODP yesterday released a global climate investment index, which shows how the world's biggest investors, including pension funds, manage climate risk.

Julian Poulter, executive director at AODP, said: "This first survey of the world's 1,000 largest retirement funds, insurance companies and sovereign wealth funds' management of climate risks shows that a large proportion of funds have their heads in the sand over climate risk.

"With around $60trn (€46.2trn) under management the investment decisions made by these investors will be critical to a safe climate and our future prosperity."

The survey found many funds did not even have a climate policy and many that did had not changed investment decisions as a result.

European investors ranked comparatively well, with nearly half of the top 50 funds ranked.

However, only six funds were rated A or above, and no European fund achieved a AAA rating.

Europe had the highest proportion of the largest asset owners after the US.

It also dominated the largest of the asset owners overall in terms of value of assets under management.

The index was built following information requests to the world's 1,000 largest asset owners, including more than 800 pension funds, 80 insurance companies, 50 sovereign wealth funds and 50 foundations or endowments.

Sharan Burrow, AODP board member and general secretary of the International Trade Union Confederation, said: "We applaud the efforts of the leaders – most of whom are European – but even many of those provide scant information to us as stakeholders to allow us to see how they are managing our future.

"As for the laggards, working people should expect more from the people who they have trusted with their retirement savings to manage the long term. These funds need to wake up to the scale of climate risk, but also members need to start applying pressure to drive the change."

Of the 314 funds assessed, almost one-third scored zero, with no public information at all regarding efforts to manage climate change-related issues.

The survey focused on five main categories – transparency, risk management, investment chain alignment, active ownership and low carbon investment.

The key findings of the index include:
• European funds tended to rate well in all five categories of inquiry. They were especially strong in terms of active ownership and investment chain alignment.

• Europe had the highest participation rate in each of the three main collaborative investment initiatives focused on climate change and responsibility.

• Only South Africa's Government Employees Pension Fund (GEPF) has calculated its exposure to overstated fossil fuel reserve valuations via the balance sheets of its investee companies. For this and other reasons, GEPF is ranked second in the overall index. 

The full index can be found here.