Pension funds cool on climate change

Published on Sunday 11 October 2009 20:12

SHORT-termism and "lack of demand" from pension funds is preventing asset managers from addressing the issue of climate change, according to new research.

FairPensions, an organisation that promotes responsible investment, polled 39 firms, which collectively manage an estimated 6 trillion on behalf of pension funds, individuals and other investors.

It found that fund managers overwhelmingly believe that climate change, and government policies to tackle it, will have "important" or "very important" consequences for pensions and other investments.

However, 83 per cent of respondents cited the low current carbon price as a barrier to incorporating climate change into investment decisions. Just over half highlighted a lack of demand from clients as a barrier to managing climate change.

A number of fund managers referred to an "imbalance between the relatively short-term horizons of mainstream investment analysis and the relatively long-term nature of the material business impacts of climate change," FairPensions added.

Just under 60 per cent of those quizzed did not report on climate change risks and opportunities, or only did so to clients on request.

Duncan Exley, director of campaigns at FairPensions, said: "Climate change is rapidly becoming a key investment issue, and while we do not always know what the precise impacts on investments will be, we do know that there will be impacts.

"Our research shows that there is good practice by some fund managers, but that not all fund managers are the same."

He said that the research also revealed "surprisingly strong" fund manager appetite for regulations requiring companies to report greenhouse gas emissions (86 per cent) and to reduce their emissions (72 per cent).