Investors scrutinizing high carbon emissions risk
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • BEX Capital brings on head of origination
      Varagon Capital fills new business development role
      Fitch Group in deal to acquire CreditSights
      Credit managers’ outlook still gloomy but brightening – survey
    • Will Martindale
      Cardano Group chooses group head of sustainability
      Meketa hires first chief marketing officer
      Nick Horsfall
      Redington names managing directors for investment consulting team
      Marsh & McLennan Agency sets sights on Compass Financial
    • Yellen calls for more COVID relief, retirement access
      A healthcare worker provides care for a COVID-19 patient in the intensive care unit at the Saint Joseph hospital in Marseille, France, on Nov. 20, 2020.
      World must act to strengthen against future pandemics – report
      New York State Common challenges Tyson’s dual-share stock structure
      Credit managers’ outlook still gloomy but brightening – survey
    • Fidelity cuts target-date asset threshold for lower fees
      DCIIA looks to spark engagement with plan sponsor institute
      Ascensus, Empower acquire Truist record-keeping business
      PCS Retirement acquires Alliance Benefit Group-Rocky Mountain
    • LaSalle Investment Management taps 2 for new ESG roles
      Sovereign credit ratings vulnerable to ESG risks — Moody’s
      JPMAM names head of investment stewardship, Asia ex-Japan
      New law requires MassPRIM to increase diversity of managers, consultants
    • Blackstone holiday video
      Blackstone would like to show you how things are done around the office
      Galina Churkina
      Building research earns honor from Aquila Capital
      MacArthur Foundation invests in women’s safe housing fund
      CAIA’s expansion to online exams yields big results
    • Shanghai skyline
      Global hedge funds struggle even in a more open China market
      The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
    • Dodge & Cox sets succession plan for key executives
      Labor Department names new ERISA Advisory Council members
      CalPERS records 12.4% return in 2020
      Fidelity cuts target-date asset threshold for lower fees
    • Dodge & Cox sets succession plan for key executives
      Onex Partners adds head of portfolio operations
      Fidelity International launches private credit capability with team liftout
      A sign on the exterior of a Northern Trust Corp. branch in Chicago on July 13, 2017
      Northern Trust to cut 500 jobs
    • CalPERS records 12.4% return in 2020
      Maine Public Employees boosts target to alternative credit
      Los Angeles City Deferred Comp narrows list to 2 in manager search
      Connecticut pension fund CIO resigns
    • Dodge & Cox sets succession plan for key executives
      BEX Capital brings on head of origination
      LaSalle Investment Management taps 2 for new ESG roles
      Onex Partners adds head of portfolio operations
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Chiang Ling Ng
      Hines hires first head of Asia-Pacific real estate investments
      Brand new apartment building on sunny day in spring with blooming trees
      Real estate returns forecast to trend lower – report
      Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
    • Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
      Investment consultants
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Southeastern Pennsylvania Transportation seeks actuary for 2 plans
      Pennsylvania Public School Employees assigns $100 million to venture capital fund
      University of Washington looking for investment consultant
      Sacramento County Employees invests $40 million in Aristeia hedge fund
    • Southeastern Pennsylvania Transportation seeks actuary for 2 plans
      Pennsylvania Public School Employees assigns $100 million to venture capital fund
      University of Washington looking for investment consultant
      Sacramento County Employees invests $40 million in Aristeia hedge fund
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
      Hedge funds warming up to financial sector, remain long U.S. equities
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      2020 in editorial Cartoons
      view gallery
      25 photos
      Cartoons depict a year like no other
      Consultants cartoon
      Seeking an investment consultant? Caveat emptor
    • Climate change and emerging markets after Covid-19
      An Asset Owner's Guide to Multi-Manager Portfolio Management
      Research for Institutional Money Management
      The Future of the U.S. Dollar - Dominant currency or one of many?
    • Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
      Robert Raben
      Commentary: What the asset management industry must do to bolster diversity
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
      Sponsored Content By iShares
      For institutional investors, ETFs can make meeting liquidity needs easier
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Graphic: U.S. stocks were 2020's comeback kid
      U.S. fixed-income returns post another positive year
      By the Numbers
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. INVESTING & PORTFOLIO STRATEGIES
February 17, 2014 12:00 AM

Investors scrutinizing high carbon emissions risk

Barry B. Burr
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Mercer's Craig Metrick: Risk of exposure to fossil fuel companies “(is) leading to conversations about sustainability and ESG investing more broadly.”

    Exposure to companies with extensive fossil fuel reserves and companies with high carbon emissions ranks as the top concern among trends in environmental, social and governance issues, driving pension funds to examine the risks and to craft responses.

    “It is probably the one (issue) that is the highest on the agenda of many of our clients,” said Linda-Eling Lee, New York-based global head of ESG research, MSCI Inc. “We're getting more questions about it and more discussion around it than probably any of the other issues.”

    Craig Metrick, Denver-based principal and U.S. head of responsibility investment, Mercer LLC, said risk of exposure to fossil fuel companies “is a very strong trend and issue of concern, and also leading to conversations about sustainability and ESG investing more broadly.”

    The $181.1 billion California State Teachers' Retirement System, West Sacramento, is reaching out to money managers, consultants and analysts to get their tolerance for carbon asset risk exposure, said Ricardo Duran, information officer, investments. Pension fund officials seek to grasp how they are valuing assets and assessing risks as part of the fund's effort to develop strategies. He declined to identify the firms.

    Along that line, Mr. Metrick said, “We're having discussions with clients and investment managers” looking at long-term strategies. Mercer has been “advising clients on what a long-term strategy or policy could look like to address climate change and other sustainability-related issues over the long term.”

    The fossil fuels industry “is a large sector and an important one to the global economy, and taking that away could introduce risk to (a) portfolio,” Mr. Metrick said. “The question is, can that risk be managed over time. What is the investment opportunity and risk of having these assets in the portfolio? It is a matter of balancing those two (concerns).”

    In terms of recommendations to clients, Mr. Metrick said, “We don't want a strategy to focus on one issue (climate change impact on high carbon-related companies) when ... there will be other issues to address,” like water scarcity, other environmental issues, human rights and diversity. All these issues “may increasingly play a role in economic performance going forward,” Mr. Metrick said.

    CalSTRS is leading an effort to reach out to about 30 companies, discussing valuation of reserves and low-carbon strategies, Mr. Duran said, adding responses have been mostly positive in producing constructive dialogue.

    The New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds and other institutional investors have filed shareholder proposals at 10 companies, asking them to assess carbon-related risk to their capital expenditures and other business operations, according to a statement Feb. 12 by Ceres, a group of institutional investors encouraging companies to address sustainability issues.

    Proposals have targeted Exxon Mobil Corp, Chevron Corp., Southern Co., CONSOL Energy Inc., Alpha Natural Resources Inc., Anadarko Petroleum Corp., Devon Energy Corp., Hess Corp., Kinder Morgan Inc. and Peabody Energy Corp.

    “Investors require additional information on how Exxon Mobil is preparing for potential scenarios in which demand for oil and gas is greatly reduced due to regulation or other climate-associated drivers,” according to the shareholder proposal filed by Arjuna Capital/Baldwin Brothers Inc., a Marion, Mass.-based money manager. “Without additional disclosure, shareholders are unable to determine whether Exxon Mobil is adequately managing these risks or seizing related opportunities.”

    Exxon Mobil representatives couldn't be reached for comment.

    The $173.2 billion Albany-based New York fund, which filed the Devon Energy proposal, is in discussions with officials at the company attempting to reach a resolution, according to a spokesman for Thomas P. DiNapoli, state comptroller and sole trustee of the fund.

    The New York fund withdrew in January a similar proposal it filed at FirstEnergy Corp. after the company agreed “to adopt, in significant measure,” the terms of the non-binding resolution, according to a fund spokesman. Tricia Ingraham, FirstEnergy spokeswoman, confirmed the agreement “to provide additional transparency to outline plans to reduce emissions.”

    Specialty index fund

    Northern Trust Investments, Chicago, is marketing a specialty emerging markets index fund created last fall. It has $500 million in assets, including a big part from AP4, a Stockholm-based national pension fund, according to sources not connected with NTI. Northern spokesman John O'Connell declined to confirm the amount of assets under management. AP4 created the index fund in partnership with Northern using an index customized by MSCI that excludes companies with extensive fossil fuel reserves and companies with high greenhouse gas emissions.

    Mats A. Andersson, AP4 CEO, couldn't be reached for comment.

    “We are getting inquiries from other investors as divestment from fossil fuel companies is becoming topical and regulatory requirements are evolving rapidly,” Mamadou-Abou Sarr, senior investment strategist, based in Northern Trust's Abu Dhabi office, who worked on developing the index fund, said in an e-mail.

    There has been “a move toward a low-carbon economy and (examining) the risks associated with climate change.”

    The fund targeted emerging markets in part because “a large share of assets deployed in emerging markets is allocated to resource- and carbon-intensive companies,” Mr. Sarr said. This allocation “could present financial risks to investors as many large emerging markets countries take action to reverse a trend of rising greenhouse gas emissions.” Developing countries will account for 70% of projected global emissions by 2050, Mr. Sarr noted.

    “Risks associated with climate are likely to drive valuation of companies in emerging markets,” he said.

    Mr. Metrick and Ms. Lee said they are unaware of U.S. pension funds divesting stocks related to fossil fuel or carbon emissions.

    “I don't know that any of them are right now looking at divestment as a serious option,” Ms. Lee said. “But there are a lot of discussion around more generally what their carbon exposure is and what they can do more practically to reduce their exposure to carbon-stranded assets and just carbon-intensive assets in generally.”

    In January, 17 foundations with combined assets of $1.76 billion committed to divest their fossil-fuel holdings in a joint initiative called Divest-Invest Philanthropy, which is campaigning for other funds to join the move. The divestment initiative includes the $335 million Park Foundation Inc., Ithaca, N.Y., the biggest of the group, followed by the $304 million Schmidt Family Foundation, Palo Alto, Calif., founded by Eric E. Schmidt, executive chairman of Google Inc.

    “Part of the dynamic (of divesting) is it's not that easy to implement” for large funds, Ms. Lee said. Fossil-fuel companies make up 8.5% of the market capitalization of the MSCI All-Country World index, she added.

    Related Articles
    ESG trailblazers now lag other institutional investors
    Pension execs encouraged to develop divestment policies
    CalPERS backing ESG engagement with stock purchases
    ULI conference focuses on healthy real estate
    F&C: ESG engagement leads to almost 300 changes at companies in 2013
    Investors' paths diverge on fossil fuels
    Morningstar exec urges fossil fuel write-down
    Funds join with Mercer to study climate change effects on asset allocation
    PRI exec harnessing the power of $45 trillion
    Energy investors cautiously fill up
    University of British Columbia faculty eyes fossil-fuel divestment for endowment
    Recommended for You
    More funds testing water on crypto-related assets
    More funds testing water on crypto-related assets
    Money managers eager to make leap to opportunity zone investing
    Money managers eager to make leap to opportunity zone investing
    Index investing: Not as passive as you might think
    Index investing: Not as passive as you might think
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Climate change and emerging markets after Covid-19
    An Asset Owner's Guide to Multi-Manager Portfolio Management
    Research for Institutional Money Management
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    The Future of the U.S. Dollar - Dominant currency or one of many?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center