IGCC annual conference discusses managing climate change risk, solutions

Investors and financial service providers are seeking climate change solutions and tools to assess how companies are applying strategies such as climate change scenario planning.

That was the theme of part of the Investor Group on Climate Change’s (IGCC) annual conference last week. The debate has moved past acceptance of climate change, or defining the risks of climate change and are focusing on pushing the development of products and strategies for asset owners to invest in climate change solutions, and for financial service providers to asses companies’ performance.

In a master class session discussing low carbon tools for the transition, Alexis Cheang, Senior Responsible Investment Consultant, Mercer Investments, noted that Mercer had identified 10 funds with strategies either n low carbon, low-Risk, or sustainable investing approaches, as well as separate managed accounts (SMAs) that have broad-market approaches to managing carbon risk in Australia. By comparison, in the US, Mercer has identified 55 unit trusts that are fossil fuel free or have a strong low carbon approach, and a further 23 that also focus in sustainable solutions.

Talieh Williams, manager governance, sustainable investments at UniSuper noted that the superannuation fund tended to be underweight the benchmark in its exposures to fossil fuels, and had “almost no thermal coal” exposure. Where the fund has exposures to fossil fuels through investments in BHP Billiton, Wesfarmers and Rio Tinto, they are “highly engaged in companies regarding climate risk management on both a transition and a resilience perspective.” UniSuper also has two defined sustainable investment options for superannuation fund members, but Williams noted that the take-up of the two fund options – the sustainable balanced and the sustainable high growth options, as well as the Global Environmental Opportunities sector option.

The Global Environmental opportunities had $440.1 million, which she called “reasonable, but in terms of a $63 billion fund, not huge.” Meanwhile the sustainable balanced and sustainable high growth options have more than $3 billion combined assets under management and 30,000 members participating, and Willliams noted those figures were “incrementally increasing, but not as high as we would have expected.”

Ilya Serov, associate managing director, Moodys’ Investor Services, noted that disclosures is a significant challenge in terms of the level of disclosures by corporations. Serov said the disclosures “lack consistency and lack depth,” which is challenging as a ratings agency. Serov identified the Task-force for Climate-Related Financial Disclosures (TCFD) guidelines as an initiative that they support as leading to “more homogenous and systematic disclosures.”

Cheang also highlighted the GRESB ratings for infrastructure and real estate as an important benchmark. UniSuper supports GRESB, and said that UniSuper has been “pleasantly surprised” by the progress made in disclosure in the real estate and infrastructure classes.