13 January 2012

World’s largest investors issue guidelines for company action on climate change

The world’s largest investors have issued a document detailing their expectations of how companies should approach responding to climate change

Institutional Asset Manager | 12/01/2012

The document provides a unified global investor voice on the issue for the first time, in response to concerns about the impact of climate change on their investments.

Co-ordinated by three leading investor groups on climate change, the US-based Investor Network on Climate Risk (INCR), the European Institutional Investors Group on Climate Change (IIGCC) and the Investors Group on Climate Change (IGCC) in Australia and New Zealand, the document outlines seven steps investors expect companies to take to minimise the risks and maximise the opportunities presented by climate change and climate policy. The seven steps are in the areas of governance, strategy, goals, implementation, measurement, disclosure and public policy.

By moving beyond disclosure and outlining clearly the areas in which investors expect to see companies take action, the guidelines provide a platform from which investors can monitor the performance of companies and engage with them to encourage positive steps on climate change. Investors are already taking action by monitoring alignment with their expectations through initiatives such as the Carbon Disclosure Project, and collaborating to engage with companies through investor networks and the UN Principles for Responsible Investment.

The expectations detailed today are of particular importance for companies in carbon-intensive sectors, and those who have not have adopted carbon reduction targets or a systematic approach to managing climate change risks.

The statement will be formally launched on 12 January at the Investor Summit on Climate Risk & Energy Solutions, a meeting of 450 global investors at the United Nations in New York.

Craig Mackenzie, head of sustainability at USD200bn Scottish Widows Investment Partnership and one of the authors of the statement, says: “This statement aims to ensure companies are left in no doubt exactly what investors expect of them on climate change. Leading companies have told us that systematic energy efficiency measures enable them to reduce emissions and increase profits at the same time. These guidelines spread this message, and help us identify and engage with companies which appear to be lagging behind. By taking action now we will protect shareholder value today, while helping mitigate the profoundly negative consequences severe climate change poses for the global economy in the future.”

Donald MacDonald, Chairman of the IIGCC, says: “This document enables investors to communicate more clearly the actions they expect companies to be taking on climate change. By following these seven steps companies can both reduce the impact of climate change and seize opportunities for growth. As the climate change talks in Durban demonstrated, there is global determination at a political level to move towards a low carbon economy. It is therefore more important than ever for investors and companies to ensure they are well-placed to identify and act upon climate change risks and opportunities. By providing a unified investor voice and a framework for engagement, this document will help investors and companies to achieve this.”

Jack Ehnes, CEO of the California State Teachers' Retirement System (CalSTRS) and a member of the INCR executive committee, says: "These guidelines are a clear message to companies that investors expect them to step up and better navigate this complex climate challenge. From the severe drought in Texas to massive flooding in Thailand, US investors are acutely aware of climate impacts on the global economy and corporate bottom lines. More than ever, shareholders are watching closely to see which companies are leading or lagging in managing climate change, which creates both enormous risks and opportunities for global businesses."

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