The vast majority of the world’s largest investment managers are not factoring climate-related trends into their short- and long-term investment decision-making, resulting in significant hidden risks in the trillions of dollars of investment portfolios they are managing. This is the findings of a new study by Ceres , a coalition of investors, environmental groups and other public interest organizations working with companies to address climate change.
It is not really surprising, given that world leaders were unable to provide definitive leadership on climate change in Copenhagen. But bringing the countries of the world together on such a major issue should be harder than convincing investment managers that climate change is going to affect business.
The report, released last week, surveyed leading asset managers in 2009 on their responses to the increasing business risks and investment opportunities associated with climate change. It was sent to the world’s 500 largest asset managers, according to the Pensions & Investments Global 500 Survey. Here is what Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk, had to say about the results:
Despite the growing recognition of the far-reaching impacts climate change will have on the global economy, only a handful of asset managers are integrating climate risks and opportunities throughout their investment practices. These findings make clear that the investment community is overly focused on short-term performance and ignoring longer-term business trends, such as climate-related risks and opportunities. The recent subprime mortgage meltdown is a painful reminder of the fallout for investors who ignored hidden long-term risks.
The problem is that this theme of focusing on the short-term is not a new one. Remember Enron? The criticism after that energy giant fell was that everyone was focused on the short-term profits and not the long-term issues around where the actual business was headed. The sad truth is that business leaders, like politicians, never seem to make the important decisions until they are forced upon them. The general public, in both cases, will continue to pay the price.