UNEP FI Asset Management Working Group The - UNEP Finance ...

these, 49% said they did not because investors did not ask for them.
Adding to asset managers’ disinclination to address climate change in their investment analysis, according to
Ceres, is the fact that “Incentive structures and benchmarks that asset owners use for evaluating asset
managers are heavily weighted toward short-term performance focusing primarily on quarterly returns where
climate risks are far less likely to show up.”
But as one respondent noted, “Climate change, along with the governmental response to it, will fundamentally
reshape valuation for a broad selection of the global economy.”
When climate risk is incorporated into investment analysis, it is most often done so in response to regulatory or
litigation risk, both of which were cited by two-thirds of respondents. Half of the respondents incorporated
competitiveness for products and services relating to climate change. Only one-third cited the more long-term
considerations of physical risk or greenhouse gas (GHG) emissions management as factors.
On the basis of its survey findings, Ceres provided a number of recommendations for asset managers. It
recommended that asset managers assess climate risk for all investments, include a statement about climate
risks and opportunities in their policies, and include climate risk in their evaluations of corporate governance.
Ceres also recommended that asset managers adopt proxy voting policies on ESG considerations, including
climate change. Its survey found that only 29% of respondents have proxy voting policies for shareowner
resolutions on climate change at present, and the report includes as an appendix a sample proxy voting policy.
Finally, Ceres recommended that asset owners engage with the Securities and Exchange Commission (SEC)
and policymakers to encourage full corporate disclosure of climate risks and opportunities. As Ceres noted in its
report, the SEC is currently considering investor requests that it offer interpretive guidance on corporate
reporting of climate risks and opportunities, and has already issued guidance to make it easier for investors to
file shareowner resolutions relating to climate change.
In its recommendations for institutional investors, Ceres also advised engagement with the SEC and
policymakers. It also recommended that institutional investors analyze climate risks in their investment portfolios,
train staff and managers to identify best practices in corporate governance relating to climate change, and adopt
sustainability policies to provide guidance for advisors and asset managers.
Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk (INCR), a network of
investors promoting better understanding of the financial risks and opportunities associated with climate change,
said, “These findings make clear that the investment community is overly focused on short-term performance
and ignoring longer-term business trends such as climate-related risks and opportunities. The recent subprime
mortgage meltdown is a painful reminder of the fallout for investors who ignored ‘hidden’ long-term risks.”
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