Several pension funds, including the State Board of Administration of Florida, California Public Employees’ Retirement System, California State Teachers’ Retirement System and Connecticut Retirement Plans and Trust Funds are all developing a best-practices list to measure how well their external money managers are assessing the risks and opportunities climate change poses to the companies in which they invest.
In Florida, Alex Sink, the state’s chief financial officer, sent a questionnaire last October to all the fixed-income managers that invest portions of the $24 billion state treasury. Soon, external managers of the state’s $137 billion defined benefit plan will be asked to fill out a similar questionnaire.
Here is the questionnaire.
Certain economic and/or investment sectors may become more or less profitable as businesses respond to environmental changes or as regulation is increased in those areas, both domestically and globally. In addition, some companies within these industries may have differing approaches to climate change, and therefore may be expected to perform differently according to future developments.
• Please comment on whether your firm monitors this risk and if it is an input to the investment process in assessing the valuation of a particular firm or industry.
• Please explain how you evaluate regulatory risk as it relates to laws and treaties regarding greenhouse gas emissions, environmental issues and climate change.
• Please comment on if and how your firm assesses and quantifies the risk that climate change related issues will adversely affect actively managed portfolios.
• Do companies provide sufficient information for your firm to evaluate their risk?
• If not, what additional information would be helpful in order to assist this evaluation?
• Do you have any additional perspective regarding the physical, regulatory or economic trends related to climate change?
(Source: Florida State Treasurer's office)
