Chris Wagstaff, Head of Pensions and Investment Education, provides insight into how asset owners and asset managers should be responding to climate change.
Climate change is the greatest ever systemic risk to confront humanity. From a purely asset manager and institutional asset owner perspective, a failure by all stakeholders to act more decisively in stemming the myriad sources of GHG emissions, the financing of carbon emitting technologies and in seeking to change industry, company and individual behaviours could result in a deeply impaired economic and financial system. This would, in turn, severely inhibit the ability of asset managers to generate and asset owners to derive sustainable investment returns and expose asset owners to unacceptably high and largely unmanageable risks.
While the enormity of the challenge ahead cannot be underestimated, asset managers and institutional asset owners have a significant, potentially game changing, influence in transitioning the world to a low carbon future, by collectively engaging with policymakers and regulators and in exercising responsible stewardship over companies. In fact, to say that asset managers and asset owners are not only very well positioned to be the catalyst for major transformative change, but that they have the potential to lead the world in addressing humanity’s greatest systemic challenge to date, is no exaggeration. Therefore, this paper looks at how asset owners and asset managers, whether independently of or in line with policymaker or regulatory initiatives, should be and have been responding to, and indeed pre-empting, the potentially gargantuan, game changing systemic risks posed by climate change.