Wall Street And World’s Largest Asset Managers are Awake to Climate Change
(3BL Media/Justmeans) â Decarbonising the global economy is an ambitious plan. Now, corporate leaders understand the size of the challenge and the importance of meeting it. We are on the threshold of an economic revolution that will transform how we think about productive activity and growth. Wall Street is waking up to climate-conscious investing; financial giants are acquiring investment boutiques and quickly building departments to address environmental opportunities and risks. CDP (Carbon Disclosure Project) is working to transform the way the world does business to prevent dangerous climate change and protect our natural resources. It was set up, almost 15 years ago, to serve investors; a small group of 35 institutions, managing US$4 trillion in assets, wanted to see companies reporting reliable, comprehensive information about climate change risks and opportunities.
Since that time, CDPâs base has grown to 822 investors with US$95 trillion in assets, and the corporate world has increasingly responded to their requests for the information they provide. Now, more than 5,500 companies disclose to CDP, generating the worldâs largest database of corporate environmental information, covering climate, water and forest-risk commodities. The worldâs largest asset managers are designing products that capture the full returns of the S&P 500 and other indexes, adding green bonds to their fund offerings. Ratings agencies and index makers are planning to use the tools they developed for climate-based products to rate mainstream stock indexes, corporate bonds, and mutual funds.
CDP has led this shift, harnessing the power of investors representing one-third of the worldâs assets under management. In 2000, when CDP first asked investors to sign its disclosure request to companies, most fund directors were indifferent to climate change issues. Today, Bloomberg terminals feature CDP data, scores and rankings in its Environmental Social and Governance (ESG) section, which gets 718 million data hits per month. There are more than 20,000 regular users of ESG data on the Bloomberg platform. CDP data, scoring and rankings that feed into new financial tools and products have mobilised the investment community to recognise climate change and to drive company disclosure.
Increasing scrutiny by investors regarding environmental performance is reflected in company responses to CDP: dramatic shifts in corporate behaviour have been observed over the past five years. At board level, responsibility for climate change has jumped from 67 percent to 95 percent from 2010 to 2015. Incentives for staff that help companies meet energy efficiency or carbon pollution reduction targets have risen from 49 percent to 83 percent between 2010 and 2015; and companies actively working to reduce their greenhouse gas emissions have increased from 52 percent to 96 percent.
This momentum comes at a crucial time, in advance of the pivotal United Nationâs climate talks, starting in Paris week. A successful agreement would set the world on course for a goal of net zero emissions by the end of this century, providing business and investors with a clear, long term course against which to plan strategy and investment.
Photo Credit: Fotis Bobolas on Flickr