It's official: climate change is a financial risk
Environment — di Valentina Neri
For the first time, the majority of major investors agree: climate change is a financial risk. But there are still many laggards.
It's official: climate change is a financial risk
For the first time, the majority of major investors agree: climate change is a financial risk. But there are still many laggards.
For the first time, the majority of major global investors are stating it in no uncertain terms: climate change represents a financial risk in every sense of the word. This is the finding of the latest study by the Asset Owner Disclosure Project, the initiative that aims to establish a global standard for the management of climate risk by investors. But even in this case, experts stress, there is a world of difference between words and actions.
The global investor rankings
The Asset Owner Disclosure Project has recently published its rankings, which analyse the 500 largest asset owners in the world (pension funds, insurance companies, sovereign wealth funds and so on) and, for the first time, the 50 largest asset managers as well. Each of them has been assigned a rating, based on a number of parameters. Starting from the leaders, with a rating between A and AAA, the scale moves to challengers (B-BBB), students (C-CCC), bystanders (D-DDD) and finally laggards (X), meaning those who do absolutely nothing to manage climate-related financial risk.
Climate change is a financial risk: the majority says so
This is precisely where the new development lies. For the very first time, the majority of investors are taking action to protect their portfolios from the financial risk associated with climate change. Looking at asset owners, we are talking about 299 institutions, whose funds are worth $27 trillion. The psychological threshold of 50 per cent has thus been comfortably surpassed: it had never happened before.
At the top of the Asset Owner Disclosure Project rankings we find mainly organisations from Europe and Oceania, with a few American exceptions. Among the leaders there are some notable new entries, such as TIAA, the giant US pension fund in the field of education, and the insurance company Axa.
The US and China fail
However, we must not lose sight of the other side of the coin. As many as 40 per cent of asset owners and 6 per cent of asset managers receive a resounding failing grade, with an X rating. Among them are some highly respected names such as China Investment Corporation (the Chinese sovereign wealth fund), the sovereign wealth funds of Kuwait, Qatar and Abu Dhabi, and the pension funds of Virginia, Minnesota and New Jersey. It should be noted that, until last year, the X ratings were far more numerous (246 asset owners, compared to 201 this year). For fund managers, no comparison with the past is possible because they had never been monitored before.
What is most concerning, however, is the fact that the world's largest economies, the United States and China, are among the worst performers. In China, laggards account for 67 per cent of asset owners, who hold 80 per cent of the Asian giant's assets. In the US, 63 per cent of asset owners (with assets under management totalling $4.5 trillion) are completely ignoring the issue of climate change.