Climate change risk is now a mainstream issue for institutional investors and last year has seen many significantly step up their action to manage this. However only a handful are protecting their portfolios from the very real danger of stranded asset scenarios, and it is shocking that nearly half the world’s biggest asset owners are doing nothing at all to mitigate climate risk.
Asset owners who do recognise climate risk are taking significantly more action than last year. The Leaders are widening the gap from the Laggards, but the Learners are starting to catch up. These results are even more impressive, as the 2016 Index is more stringent, requiring evidence of tangible action and removing credit purely for transparency or commitments.
The positive findings indicate more asset owners are appointing staff with responsible investment and sustainability focus showing a 43% increase this year and support for climate resolutions is growing with a 62% increase.
10% of assets owners now calculate their portfolio carbon emissions – a 50% increase from 2015 (7%), yet still only 2% declare an emissions intensity reduction target for next year.
However there has been very little change despite the warnings on stranded assets. Just 5% of asset owners disclose measuring the impact stranded asset scenarios may have on their investments.
While there is a 63% increase in disclosed lowcarbon investments from last year, $138 billion represents just 0.4% of the index. This will need to improve dramatically if we are to meet the target of the Paris Agreement.
Momentum is building in the industry and there are many more asset owners embarking on the journey.
51% of the index are now taking some action in managing investment climate risk, which is a positive outcome. There are clear areas for improvement that need to gather pace – investors need to take a more serious look at the potential risks of stranded assets in their portfolios and disclosure of both high and low-carbon investments needs to be more transparent.