Climate change is becoming more and more topical for pension funds and other investors. Most recently, Pensions Minister Guy Opperman wrote to the biggest 50 schemes to remind trustees of their responsibilities when it comes to environmental, social and governance, and climate change policies. This comes off the back of a new regulation that came into effect in October 2019 urging the industry to pay closer attention to responsible investment. In fact, funds of all sizes should be turning their attention to sustainable investments.
In 2011, Mercer published its first global research report on climate change and its implications for strategic asset allocation, in partnership with a number of our institutional investment clients. In June 2015, we released a major update, Investing in a Time of Climate Change (“the 2015 Report”), another client collaboration. We are now publishing Investing in a Time of Climate Change — The Sequel (“the Sequel”).
Investing in a Time of Climate Change – The Sequel documents Mercer’s latest climate scenario model for assessing the effects of both climate-related physical damages (physical risks) and the transition to a low-carbon economy (transition risks) on investment return expectations. The Sequel models three climate change scenarios, a 2°C, 3°C and 4°C average warming increase on preindustrial levels, over three timeframes - 2030, 2050 and 2100.
Since 2015, there have been many environmental, scientific, political and technological developments that continue to evolve our understanding of the climate change related investment context. In response to these developments and client demand, Mercer has updated its climate scenario model and is proud to publish the Sequel. The Sequel focuses on what is new and the “why, how and what” for investors, providing help, information and guidance including peer case studies.
The findings strengthen the argument for investor action on climate change and suggest greater attention is required on how investors will actively support the transition to a 2°C scenario – as “Future Makers”. Fiduciaries – motivated by the economic and social interest of their beneficiaries and clients – have the opportunity, and arguably the obligation, to use their portfolios and their influence to help guide us towards this more economically secure outcome.
We look forward to the opportunity to support our clients in incorporating climate change throughout the investment process and build climate resilient portfolios and encourage you to reach out to your local consultant to discuss the findings in more detail.
We’d be happy to set up a free consultation or send you more information to get you started.