Climate Change Takes Center Stage in ESG Investing Criteria
Friday, November 4, 2016
by: Lisa woll

Section: Policy

The Paris Agreement goes into effect today, a global effort to mitigate global temperature rise, strengthen the ability of countries to deal with the impacts of climate change, and support the transition toward low-carbon, resilient economies. This marks an important milestone for money managers, institutional investors and others who have worked diligently to strengthen the response to climate change through the incorporation of environmental, social and governance (ESG) factors and support policy that addresses climate change.    

US SIF has issued formal comments in support of the US Environmental Protection Agency’s Clean Power Plan, and strongly supported guidance issued by the Department of Labor in 2015 that assures fiduciaries of private sector retirement plans that they may consider climate and other environmental factors in investment analysis and portfolio selection. 

Data from US SIF’s biennial Report on US Sustainable Responsible and Impact Investing Trends, which surveys US institutional investors and money managers, has played a critical role in supporting climate change policy efforts. Our 2014 biennial report revealed that climate change was the most significant environmental factor considered by money managers and institutional investors, affecting $275.6 billion in money manager assets and $551.5 billion in institutional assets.

Moreover, shareholders concerned about climate risk filed 72 resolutions on the subject in 2014, more than double the number in 2012, and negotiated a number of commitments from target companies to disclose and reduce their greenhouse gas emissions.

The 2016 Trends Report, which will be released November 14, will reveal an even greater focus on climate change. The report will show that there has been a dramatic expansion since the 2014 report in professionally managed assets that consider climate change and carbon emissions as investment criteria.

Concerns over the risks associated with climate change and with dependence on fossil fuels have broadened the scope of environmental investing. “Green investing” in clean technology, alternative energy and environmental services has fueled considerable economic growth and financial innovation over the last several years, including the development of a market for “green bonds” for environmental projects and services.

Additionally, a number of investor coalitions coordinate shareholder advocacy and promote public policies to encourage energy efficiency and renewable energy and other initiatives. They also encourage reporting on a wide array of climate-related data as well as information on water use. The fossil fuel divestment campaign has further heightened investor attention to climate change.

The Paris Agreement is a critical framework for work to address our climate challenges, and the role of investors in addressing these challenges remains an important piece of the solution. 

Lisa Woll is the CEO of US SIF: The Forum for Sustainable and Responsible Investment, the leading voice advancing sustainable, responsible and impact investing across all asset classes., @US_SIF
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