Less than one fifth of European institutional pension investors are weighing up risks to their portfolio from environmental issues, a survey has found.
The 2018 European Asset Allocation report, by investment consultant Mercer, found that just 17 per cent of European pension funds were considering the risks to returns posed by climate change, although this total had risen by 12 percentage points since last year’s survey.
When the survey was conducted in 2016, only five per cent of European Pension funds said they were considering the risks that climate change posed to long-term returns. In 2015, this number was even lower at four per cent.
In a media statement accompanying the research, Phil Edwards, global director of Strategic Research at Mercer, said regulatory changes may have led to an increase in engagement but the relatively low total showed that there is much more to be done to raise awareness.
He said: “Nudges by the UK’s Pensions Regulator, the EU Commission and the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) are driving increased engagement.
“However, at 17% of respondents, there is further to go in terms of serious investor engagement on this issue. We expect the industry-led approach of the TCFD to continue to drive awareness of the issue.”
The 2018 survey, which was conducted among 912 European pension participants, also found that more than a third of respondents (34 per cent) said that regulatory drivers would be the key influencing factor for them to consider ESG risks in the future.
It comes just days after a joint research paper by the London School of Economics and the Grantham Research Institute on Climate Change and the Environment, entitled Investing in a Just Transition.
The research paper, released at the beginning of June 2018, warned that investor strategies on climate change “have yet to incorporate a robust social dimension” and stressed the “implications” of a shift to a zero-carbon economy were not yet being addressed by investors.
“By including the just transition in their climate strategies, investors can not only tackle the challenge of ‘stranded assets’ but also of ‘stranded workers’ and ‘stranded communities,’” the report authors wrote.
“Such action looks set to be a critical part of the way in which investors can help to accelerate the transition to a zero-carbon economy and thereby support the development of a more efficient, effective and sustainable global financial system.”
