U.S. & European Investors Tackle Climate Change Risks and Opportunities
Investors Seek Climate Risk Disclosure, Call for Improved Financial Analysis, Commit $1 Billion to Invest in Clean Energy Technology Opportunities
New York City, NY — May 10, 2005
Two-dozen leading U.S. and European institutional investors managing over $3 trillion in assets today released a 10-point action plan calling on U.S. companies, Wall Street firms and the Securities and Exchange Commission to intensify efforts to provide investors with comprehensive analysis and disclosure about the financial risks presented by climate change. The group also pledged to invest $1 billion in prudent business opportunities emerging from the drive to reduce greenhouse gas emissions.
Highlighting the far-reaching impacts that climate change will have on the world economy, the investors said that while an increasing number of companies, fund managers and others in the investment community are tackling the issue, many are not – and the imperative for broader action is acute.
“Corporate and financial leaders need to look strategically at climate change and how it will impact the long-term health of businesses, industries and our economy,” said Connecticut State Treasurer Denise L. Nappier, one of 26 investors who issued the action plan at a climate risk meeting today at the United Nations. “Institutional investors are interested in sound, long-term value, but our ability to make solid investment decisions depends on a thorough evaluation and full disclosure of risk.”
Nappier said investors can also benefit from the enormous opportunities that are arising as greenhouse gas limits are enacted more widely around the world. “The risks are real, but so too are the opportunities,” she said.
The action plan was announced at an Institutional Investor Summit on Climate Risk at the UN attended by more than 375 financial, corporate and investor world leaders. Supporters of the action plan include state treasurers, comptrollers and pension funds leaders from London, California, Illinois, New York, New York City, Connecticut and over a dozen other entities (Full list of signers is attached.)
The action plan calls for a series of specific steps by institutional investors, fund managers and financial advisors, companies, and the federal government. Among the investor commitments:
• Urge publicly held companies in the electric power, auto, and oil and gas sectors to report within a year to investors on how greenhouse gas emissions limits and other climate change scenarios will affect their businesses and steps they are taking to reduce those risks and seize new market opportunities
• Require investment managers overseeing their fund assets to describe their resources, expertise and strategies for assessing financial risks associated with climate change;
• Evaluate and rank 100 of the world’s largest, publicly-held companies on their actions for reducing climate change risks and share the scorecard report with investors later this year;
• Invest $1 billion of capital in the next year in companies with clean technologies that stand to benefit as greenhouse gas limits become more widespread.
• Urge the Securities and Exchange Commission (SEC) to require companies to disclose financial risks related to climate change
Although only 18 months have passed since the first Institutional Investor Summit on Climate Risk was held at the UN, worldwide investor attention on the issue has dramatically increased. Today, investors with more than $2.7 trillion in assets are actively participating in the Investor Network on Climate Risk, a coalition of investors launched at the inaugural summit in November 2003.
The growth comes as the physical impacts from global warming have become clearer and worldwide regulatory action to curb global warming pollutants has become more widespread, the recent adoption of the Kyoto Protocol by dozens of industrialized countries being just one example.
As a result, a growing number of investors are now asking U.S. companies, regulators and Wall Street to turn their attention to this issue so that potential financial risks can be reduced and new market opportunities from clean technologies can be maximized. In just the past year, two-dozen leading U.S. companies in the electric power, oil & gas and auto sectors have agreed, at the request of investors, to study and report on their financial exposure from climate change and strategies they are pursuing to improve their strategic positioning.
Today’s climate risk meeting was co-chaired by Treasurer Nappier and former U.S. Senator Timothy E. Wirth, president of the United Nations Foundation. The summit was co-hosted and organized by the United Nations Fund for International Partnerships and the Investor Network on Climate Risk. INCR is directed by Ceres, a U.S. coalition of investors and environmental leaders that has spearheaded national and international investor activity on climate risk issues.
“Assessing climate change is now an essential aspect of intelligent investing,” said William C. Thompson Jr., comptroller for New York City. “Global warming will cause major shifts in the global economic landscape. For investors, those changes hold both risks and opportunities and understanding these risks and opportunities is an important part of fiduciary responsibility.”
"The success and safety of our portfolio largely depends on accurately forecasting business trends and making solid long-term investments," said California State Controller Steve Westly. "But we must consider how a changing regulatory environment could negatively impact our investments. A wise investor cannot ignore climate change and still effectively plan for the future."
“The USS supports the call for action and urges other pension funds to take similar steps to assess the risks and opportunities that climate changes represents to investor returns and to collaborate to find efficient and effective solutions to an issue that may both affect investments in markets globally and the retirement well-being of members,” added Sir Graeme Davies, chairman of the Universities Superannuation Scheme, the second largest private pension fund in the U.K. “For funds like USS that have significant exposure to companies in North America, INCR is a valuable complement to our management of risk in this area.”
“The fact that investors managing trillions of dollars of investments are taking these actions today is a powerful message that global climate change is an environmental threat and a financial threat, and that actions to mitigate these risks and maximize new market opportunities are needed now,” said Mindy S. Lubber, president of the Ceres investor coalition and director of the Investor Network on Climate Risk.
Peyton Fleming, Ceres, 617-247-0700 x 20 and 617-733-6660 (cell)
Robyn Belek, Connecticut State Treasurer’s Office, 860-702-3013