Institutional investors with combined assets of $1.5 trillion have partnered with Mercer to study the asset allocation implications of climate change, said a statement Monday from Mercer.
Pension funds include the $186.6 billion California State Teachers' Retirement System; Sweden's 252.5 billion kronor ($35.2 billion) AP1; Australia's A$25 billion (US$22.2 billion) Construction & Building Industry Super and the A$13 billion State Super Financial Services; the NZ$26.8 billion (US$21.8 billion) New Zealand Super Fund; Britain's £2.4 billion ($3.9 billion) Environment Agency Pension Fund and the London-based Church Commissioners, which oversees £5.5 billion to support pensions and work of the Church of England. Another partner is Allianz Climate Solutions, a Allianz Group unit focused on renewable energy and energy efficiency investments.
Mercer will frame the study with “several plausible climate scenarios with distinctive economic and market impacts, modeled out to 2030 and 2050,” the statement said. “The study will relate these scenarios to the risk and return characteristics of key asset classes, regions and sectors.”
Mercer plans to publish the study by the end of March.
“The multiscenario, forward-looking approach to this study makes it unique. Investors will be able to consider allocation optimization, based on the scenario they believe most probable, to help mitigate risk and improve investment returns,” Brian Rice, CalSTRS portfolio manager, said in the statement.
Jane Ambachtsheer, partner and head of global responsible investment for Mercer, said in the statement: “Our objective with this latest study is to help investors make robust, well–researched investment decisions that factor in a consideration of climate change. In this study, we are helping investors identify ways to hedge against climate risks as we transition to a lower carbon economy. New data points and scientific evidence are now available, including the topical subject of the potential risk posed by so-called 'stranded' carbon assets.”
“Ultimately, it's about enabling institutional investors to adapt over the longer-term,” Ms. Ambachtsheer added.
NERA Economic Consulting and Guy Carpenter & Co. — both of which, along with Mercer, are units of Marsh & McLennan Cos. — will assist in the study.
