Only 5% of more than 1,000 European pension schemes surveyed had considered the investment risks posed by climate change, meaning there needed to be more urgency over the issue, said investment adviser Mercer.
Phil Edwards, Mercer’s global director of strategic research, noted that the Paris Agreement, which came into force in November 2016, signalled the direction of climate policy and that investors should consider the potential financial impacts of climate change on their portfolios.
He said: “It’s ironic that the pace of response to this enormous issue is best described as glacial, outside a small group of leading funds. Inactivity by pension schemes brings risks from stranded assets and physical climate risks, as well as reputational concerns. A proactive approach can open up investment opportunities in the green fields of the low carbon economy.”
Mercer’s ‘European Asset Allocation Report’ surveyed 1,241 institutional investors across 13 countries with €1.1 trillion of assets.
Despite the lack of action on climate change, the report found there had been a gradual increase in the number of European pension schemes factoring environmental, social and governance (ESG) issues into their investment processes.
Financial materiality was the main driver, cited by nearly a third of respondents, followed by reputational risk, cited by 20%.
A fifth of asset owners integrated ESG risks into their investment beliefs and just over a fifth had a standalone responsible investment policy.
Other findings included:
- 28% of asset owners considered ESG and stewardship as part of the manager selection and monitoring process (up from 22% in 2016).
- 29% requested advisers to monitor stewardship issues on their behalf (up from 20% in 2016).
- 9% reported on their stewardship activities publicly (up from 6% last year).
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