UN, Major Investment Firms Call for Increased Focus on Carbon Risk Management and Carbon Accounting in Investment Industry
Institutional investors should start measuring, disclosing and reducing greenhouse gas (GHG) emissions associated with their investments and portfolios to reduce policy, regulatory and financial risks associated with these emissions, according to a new Investor Briefing launched by the United Nations Environment Programme Finance Initiative.
The briefing was developed jointly by UNEP and a group of leading investors, including Allianz, Aviva, Hermes, HSBC, Eurizon Capital, Inflection Point Capital, Pax World Investments, Robeco SAM and Trillium Asset Management. It argues that carbon footprinting is one of several key tools that investors should use to understand, assess and mitigate portfolio carbon risk.
According to the briefing, the build-up of GHG policy is likely to accelerate in coming years as the meteorological effects of climate change continue to intensify with increasingly disruptive impacts on communities and economies.
Advocacy groups, civil society organisations and other stakeholder groups (including investment beneficiaries) are demanding that investors start measuring and disclosing the GHG emissions embedded in their portfolios, and that they take actions to reduce them over time.
“Information on the carbon intensity, performance and climate risk exposure of thousands of companies is now publicly and readily available. But unless we reach a similar level of transparency among investors, we won’t know whether that information is used or not, nor whether it is helping to deliver the low-carbon economy,” said Gianluca Manca, Head of Sustainability, Eurizon Capital, and CoChair of the UNEP FI Asset Management Working Group.
The trend towards mandatory disclosure on climate change and other environmental, social and governance (ESG) factors by companies suggests that, from an investor perspective, GHG emissions increasingly must be treated as a source of financial risk that must be better understood, measured, communicated, and ultimately mitigated.
“Investors are starting to realize that greenhouse gas emissions increasingly represent a material risk for companies and their investors,” said Matthew Patsky, CEO, Trillium Asset Management. “It is just a matter of time before fund managers start to systematically assess and reduce the carbon embedded in their portfolios.”
Peter Lambert, CEO, Local Government Super (LGS), said, “At LGS, we regularly monitor the carbon performance of the companies in our portfolios, as well as of our portfolios themselves. This dual approach helps us assess and manage carbon risks, compare our own carbon performance to that of our peers, and clearly communicate with our members on the carbon emissions associated with their savings.”