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Are pension funds ignoring climate risk?

July 6, 2009

And are conservation groups moving into the business of giving investment advice?

It seems an unlikely path for environmentalists to take, but this WWF commissioned report warning that failure to take carbon risk into account could knock pension fund returns raises some interesting points.

“Carbon Risks in UK Equity Funds” by Mercer and Trucost ”outlines how fund manager complacency on corporate carbon performance could put pension fund assets at risk as carbon-intensive companies face rising carbon costs and their company valuations fall in the short-term in anticipation of future carbon risk”.

The report argues that fund managers “could dramatically reduce the carbon footprints of their funds through stock selection without the need to alter sector weightings or their overall investment strategy”.

It also encourages them to engage with companies in their portfolios and calls on them to support mandatory reporting requirements for corporate greenhouse gas emissions.

The research says climate change is of “little importance in fund managers’ investment decisions”, with the main reason cited for this “a lack of confidence in government policies to address greenhouse gas emissions”.

WWF wants fund managers to see there are financial incentives for pension funds and other institutional investors to consider carbon risk. If nothing else, it has learned to speak their language.

Comments

RE: The research says climate change is of “little importance in fund managers’ investment decisions”, with the main reason cited for this “a lack of confidence in government policies to address greenhouse gas emissions”.

Fund managers investment decisions are properly based upon the economy and the behavior of financial markets (“fear and greed”, if you will). Such decisions should not be based upon theoretical projections of complex and poorly-understood climate behavior.

Posted by Steve Numero Uno | Report as abusive
 

Where is the climate change? you bunch of orange heads WE are carbon based,do you want to change the so called climate change its e-z-, STOP BREATHING!!!!!!

Posted by nina | Report as abusive
 

Must everything be viewed through the myopic window of economics? It would seem that capitalism is the one world religion. Until we lose it, nothing will change for the good.

Posted by A | Report as abusive
 

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