Almost half of the largest 500 global asset owners fail to protect investments that are under their stewardship from the threat of climate change, shows the latest update to an index tracking climate performance.
Representing almost $40 trillion of assets, the third iteration of the Asset Owners Disclosure Project’s index found that 232 asset owners — including pension funds, sovereign wealth funds, foundations and endowments — continue to invest in heavily carbon-exposed assets.
However, of those that are moving to a lower-carbon investment portfolio, AODP awarded nine asset owners — all pension funds — the highest AAA rating. The A$8 billion ($6.2 billion) Local Government Super, Sydney, ranked first, followed by the 491 billion Norwegian kroner ($62.7 billion) Kommunal Landspensjonskasse, Oslo. The $306 billion California Public Employees’ Retirement System, Sacramento, was in third place, followed by the €344 billion ($371.9 billion) ABP, Heerlen, Netherlands; and £2.4 billion ($3.6 billion) Environment Agency Pension Fund, Bristol, England, rounded out the top five.
John Hewson, chairman of the AODP, said in a news release that it is up to the participants in pension funds, or insurance company shareholders, “to drive their funds into copying that model and taking the world into a safer climate.”
The ratings range from AAA through to D and X, which represent asset owners that “have simply failed to calculate the odds of a ‘sub-clime’ crisis,” said Julian Poulter, AODP founder and CEO, in the release.
Mr. Poulter warned that asset owners that are lagging behind risk a market climate correction and legal action. “The X-rated funds are showing willful negligence given the coverage about the issue and the number of their peers discussing it at the highest levels.”
The index found that 7% of asset owners are able to calculate the emissions of their portfolio companies, 1.4% have reduced their carbon intensity from the previous year, and 2% have an emissions intensity reduction target for next year. AODP said that no fund has yet calculated its portfoliowide exposure to fossil-fuel reserves.
The index is available on the AODP’s website.