Investors aware of climate change risks but still slow to act

[LONDON] Investors are still slow to act on climate change, despite being more aware of risks to their portfolios, as they focus more on the short term and are unclear about the costs, senior executives told Reuters.

At the end of last year, nations agreed a landmark deal in Paris to cut rising greenhouse gas emissions blamed for global warming which will come into force from 2020.

It was thought the agreement would raise awareness of climate change and make the issue more of a priority in the financial world.

Despite climate investment events, such as one held by Newton Investment Management in London earlier this week, many fund managers are still uncertain about managing climate change risks and how the issue fits into their fiduciary responsibility.

"The vast majority of investors don't think climate change is an issue they should take into account," said Ian Simm, chief executive of Impax Asset Management, which has over 3.6 billion pounds (S$6.85 billion) of assets under management in sectors such as renewable energy, energy efficiency, water and waste management.

"In many countries, there is little evidence that environmental policies have impacted fossil fuel prices over the past few years," Mr Simm added.

Up to US$24 trillion of non-bank financial assets around the world could be vulnerable to the effects of global warming, according to a study last week which said tougher action to curb greenhouse gas emissions made sense for investors.

"Compared to three to five years ago fund managers in general are much more cognisant of climate change risk," said Mark Thompson, chief investment officer at HSBC Bank Pension Trust Limited. "However, it is a journey and there is, in general, further to go. What will make fund managers travel further on that journey is demand and questioning from their clients, the asset owners," he added.

The indirect costs of climate change on businesses are not being adequately captured by markets, businesses and investors and most are still cautious about making strong investment decisions, according to Newton Investment Management.

Falling oil prices, unstable geopolitics and extreme monetary intervention make it easier for many investors to dismiss global warming as too complex or too far off in the future to address now, the firm said in a paper.

REUTERS