Sixty percent of the world’s 500 biggest asset owners, with funds worth £21 trillion ($27 trillion), now recognise the financial risks of climate change and opportunities in the low carbon transition, according to new research conducted by the Asset Owners Disclosure Project.
Every year, the AODP rates asset owners and managers on governance and strategy, portfolio risk management and metrics and targets. They are then graded, from leaders (“A”), through challengers (B), learners (C) and bystanders (D) and finally to laggards (X). The result is the Global Climate 500 Index.
This year’s index shows that only 5% of institutions in the UK are classed as laggards. Five of the top 10 asset managers are also from the UK.
Globally, the signs are also positive, with investors “rapidly scaling up action to tackle climate risk and seize opportunities in financing the low carbon economy”.
“Climate change is now a mainstream concern throughout the investment community, and activity is gathering unstoppable momentum,” the report reads. “A 60% majority of asset owners recognise the financial risks – and opportunities – of climate change, and are taking action, with growing numbers scaling up their activities to achieve A, B and C ratings.”
Across the Index low carbon investment by asset owners has risen 68% to £158 billion ($203 billion), but still represents only 0.5% of total assets under management.
There are now 112 institutions worth £8.3 trillion ($10.7 trillion) rated C and above taking tangible action on climate change (22% of the Index) up from 97 worth £7.3 trillion ($9.4 trillion) a year ago. The group of D-rated institutions taking the first steps has grown to 187 from 157. The group of X-rated laggards has shrunk from 246 to 201.
Pressure will therefore mount on those failing to take action, said AODP CEO Julian Poulter. “As the number of these laggards falls, their exposure to market re-pricing grows significantly higher and a time may be approaching when it is too late to avoid portfolio losses.”