Funds Ignoring Climate Risks Rose Last Year Despite BOE Warning

Mark Carney, governor of the Bank of England

Mark Carney, governor of the Bank of England

Photographer: Jason Alden/Bloomberg
  • Almost half world's top 500 investors score zero in risk poll
  • A fifth of investors are taking steps to mitigate risks

The number big investors ignoring climate change risk increased last year despite a stark warning from Bank of England Governor Mark Carney’s about the potential for “huge” losses from a sudden shift in regulation designed to curb global warming and fossil fuels.

Almost half of the world’s top 500 investors are failing to act on climate change -- an increase of 6 percent from 236 in 2014, according to a report Monday by the Asset Owners Disclosure Project, which surveys global companies on their climate change risk and management.

The Abu Dhabi Investment Authority, Japan Post Insurance Co Ltd., Kuwait Investment Authority and China’s SAFE Investment Company, are the four biggest funds that scored zero in the survey. The 246 “laggards” identified as not acting hold $14 trillion in assets, the report said.

“It is shocking that nearly half the world’s biggest investors are doing nothing at all to mitigate climate risk,” said Julian Poulter, chief executive officer of the research group. Pension funds and insurers that ignore climate change “are gambling with the savings and financial security of hundreds of millions of people around the world and risking another financial crisis,” he said.

He attributed the rise to a change in methodology -- Asset Owners Disclosure Project stopped giving credit to companies who were transparent about their decision not to act on climate and to companies that only pledged to take action without delivering change.

New Method

“Some people were getting off the magic points number just by being transparent, but they weren’t doing anything at all,” he said in a telephone interview.

Carney is the most prominent figure from the financial world to warn how climate related issues could destabilize financial markets in the coming years. The exposure of U.K. investors is potentially “huge,” he has said. The key danger is that changes in policy leave oil drillers and coal miners with stranded assets -- reserves that may need to be left in the ground in order to reduce pollution.

The BoE governor appointed Mike Bloomberg, founder and majority owner of Bloomberg News and its parent company Bloomberg LP, to lead a 24-member taskforce on climate-related financial disclosure. It’s due to report back with voluntary guidelines that would allow investors to compare the performance of different companies on a number of sustainability measures.

The guidelines will prompt many companies to change their reporting practices despite being voluntary, according to panel member Michael Wilkins, global head of environmental and climate risk research at Standard & Poor’s Ratings Services.

A fifth of the 500 biggest investors surveyed by Asset Owners Disclosure Project are taking steps, such as measuring carbon pollution in their portfolio, supporting shareholder resolutions for more transparency of climate risk and investing in clean technologies, according to the report.

The top five leading investors were all pension funds -- the U.K.’s Environment Agency Pension Fund, Australia’s Local Government Super, Swedish Fjarde AP-Fonden, Dutch Stitching Pensioenfonds ABP and New York State Common Retirement Fund, the researcher said.

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