Investors step up climate change demands

The proportion of institutional investors who consider firms' climate change policies when making investment decisions has more than doubled in the past two years, according to a new survey from the Institutional Investors Group in Climate Change (IIGCC).

The IIGCC polled senior executives at the 26 leading financial firms within the group and found that 60 per cent of asset owners asked climate change-related questions when meeting potential investment managers in 2009, compared to just 30 per cent in 2007.

Moreover, 70 per cent of firms surveyed commissioned or supported climate change research, compared to 45 per cent in 2008.

Significantly, the survey found that interest in climate change policies is having a tangible impact on firms seeking to attract institutional investors, with 80 per cent of respondents claiming they had actively engaged with companies on issues related to climate change, including improvements in disclosure and integrating climate change into business operations and strategies.

However, the report warned that the continued absence of comparable climate change-related disclosures was making it difficult for investors to formally integrate climate change factors into investment analysis.

Speaking to BusinessGreen.com, Ole Beier Sørensen, the new chairman of IIGCC and chief of research and strategy at Danish pension firm ATP, said there were clear signs that climate-related risks and opportunities were increasingly informing investment decisions.

He added that growing numbers of firms were responding to this shift by detailing how they respond to climate change. "There is definitely a growing respect for the need to take these issues into account, and a growing recognition that dealing with climate issues represents good business," he said. "They understand that more regulations are coming and that reputational risks are getting worse."

However, Sørensen said that few investors were yet willing to withdraw backing for carbon-intensive and polluting projects. "It is not the case that businesses [facing high climate risks] won't be able to attract investment," he said. "But they will find that investors will factor those risks in and as a result the cost of capital will increase."