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Institutions “overlooking climate change risks”

climate_change_investingInvestors globally are almost unanimous in acknowledging escalating climate risk – yet nearly half are not taking any action, research has found.

Nearly 90% of chief investment officers believe climate change is an important issue for their organisations, but only 58% are taking steps to incorporate it into investment processes. The rest are taking no action at all.

There are also distinct regional differences in investor thought and action, according to a survey by PGIM and Greenwich Associates of 101 global asset allocators, each with over $3 billion in assets under management.

When asked if climate change was a meaningful factor in asset allocation decision-making, 85% of European investors said it was significant, against 57% in Asia-Pacific and just 25% in the US.  

Taimur Hyat, chief operating officer for PGIM, said: “For the vast majority of large investors who acknowledge climate is a long-term consideration, but are yet to incorporate it into their portfolios, the time for contemplation has passed.”

The study also revealed that major investors lack confidence in analytical models and data to assess the impact of climate change on their portfolios.

Fewer than a quarter labelled existing climate change models as effective, while less than 10% utilised these tools in decision-making processes. However, the report highlighted, improved climate analytics and modelling are increasingly becoming accessible for investors.  

Davis Walmsley, Greenwich Associates’ head of client relationships, investment management, said: “One of the primary causes of the action gap appears to be uncertainty about climate models and analytics. 

“This may be an area where better understanding and deployment of existing data and analytics may encourage more investors to incorporate climate change into their portfolios.” 

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