One common measure of carbon footprints is data from the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, which developed voluntary, climate-related financial risk disclosures for companies to share with investors and other stakeholders.
Many of the investors studied by Ceres also turn to ESG data providers such as MSCI Inc., Sustainalytics and Bloomberg LP, which continue to roll out tools, including ones that measure risk intensity by industry or asset class such as real estate.
For more quantitative analysis, investors such as the C$207.4 billion ($154.5 billion) Ontario Teachers’ Pension Plan, Toronto, also use specialized data tools, Ceres found.
OTPP is working on a sector-specific ESG maturity framework for assessing companies’ sustainability management practices. It is also collaborating with Wellington Management Co. LLP and Woods Hole Research Center to dig deeper into climate change research applicable to specific investment strategies.
Investor demand is expected to spur even more options. “I have witnessed increased urgency from investors to quantify their climate risk exposures when constructing and analyzing portfolios,” said Remy Briand, head of ESG at MSCI in Geneva.
Convinced that the market is not accurately pricing the risks and opportunities associated with the transition to a low-carbon economy, Wespath Benefits and Investments, the investments division of the Glenview, Ill.-based $24 billion General Board of Pension and Health Benefits of the United Methodist Church, turned to BlackRock Inc. to customize an investment framework for managing risks and opportunities. So far, Wespath and subsidiaries have committed more than $1 billion to Wespath’s transition-ready strategies, and about 26% of their passively managed equity strategies now employ the framework.
While U.S. pension funds may be not be the global leaders on climate change, several “are doing really deep work,” Ceres’ Mr. Davis said. He cited the $194.3 billion New York State Common Retirement Fund, Albany, which through its Climate Action Plan is doing risk-related work and developing minimum standards for investing.
Other U.S. leaders include the $246 billion California State Teachers’ Retirement System, West Sacramento, for which the board of directors has commissioned work on climate and energy transition strategies, along with a low-carbon index strategy.
