Pensions of the World Unite on Climate Change

Some of the world’s biggest asset owners are backing a new climate change study, while CalSTRS is already stepping up its eco-friendly investments.

Mercer has launched a study of climate change investment with the aid of some of the world’s top asset owners.

The study aims to map out potential climate scenarios and their impacts on economies and markets, with forecasts stretching out to 2030 and 2050.

It follows a weekend of marches across the world calling for action on climate change, as the United Nations prepares to meet for a Climate Summit in New York on September 23.

Among the pension funds signed up to the study are the California State Teachers’ Retirement System (CalSTRS), New Zealand Super, and Sweden’s AP1. In total, Mercer said asset owners representing $1.5 trillion were backing the survey.

Jane Ambachtsheer, head of Mercer’s global responsible investment team, said the survey’s objective was “to help investors make robust, well–researched investment decisions that factor in a consideration of climate change”.

“New data points and scientific evidence are now available, including the topical subject of the potential risk posed by so-called ‘stranded’ carbon assets,” she added. “Ultimately, it’s about enabling institutional investors to adapt over the longer-term.”

Brian Rice, portfolio manager at CalSTRS, was among those welcoming the launch of the study. “The multi-scenario, forward looking approach to this study makes it unique,” he said. “Investors will be able to consider allocation optimisation, based on the scenario they believe most probable, to help mitigate risk and improve investment returns.”

The $188 billion pension on Friday announced it would triple its investment in clean energy and technology to $3.7 billion over the next five years, and CIO Chris Ailman said its allocation could eventually reach $9.5 billion.

“Targeting the clean energy and technology sector represents a good investment opportunity because it positions CalSTRS for a low-carbon future,” Ailman added. “If a meaningful price on carbon emissions is established, CalSTRS believes its clean energy and low-carbon investment could grow to almost $9.5 billion, nearly seven times the current level of investment.”

Mercer ran a previous study in 2011 outlining the impact of climate change on strategic asset allocation, but is now seeking to expand its research.

As well as large pensions, Mercer said the study was also backed by sovereign wealth funds, endowments, insurers, private banks, and investment managers. Each partner in the full study is to receive a “bespoke report” from the consultancy, applying the findings to its current strategy and giving tips on making portfolios “more resilient to the financial risks posed by climate change”.

Some investors—particularly university endowments—have come under pressure for investments in fossil fuels in recent months, with alumni and staff from Yale in the US and Oxford in the UK calling for their funds to cut such holdings.

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