Fund managers should be as transparent on climate change data as everyone else, argues Nick Robins
Over the past decade, investor action on climate change has evolved in
remarkable ways. Back in 1997, NPI’s Global Care team launched the
first measure of corporate greenhouse gas emissions. From this have
grown powerful collaborative initiatives, notably the Carbon Disclosure
Project (CDP). When the initial 35 investors backed the CDP’s call for
better corporate reporting on climate change in 2002, they faced
scepticism from the bulk of the financial world. Five years on, a wall
of money is pushing for better carbon governance and transparency, with
the number of the CDP’s backers climbing to 284 and their assets under
management now at $41trillion (£20.5tn). The volume of data and
analysis on climate change has expanded significantly, enabling
increasingly informed investment choices to be made. Much still needs
to be done, but the stage is set for corporate disclosure to make the
transition from voluntarity to a mandatory requirement of information
backed by an authoritative accounting standard.
Yet few of
today’s initiatives on climate change encourage investors to reveal
what they themselves are doing. The investor supporters of the CDP have
no obligation to be transparent themselves – unless they happen to be
among the listed companies targeted for disclosure. Similarly, the
guide produced by the Institutional Investors Group on Climate Change
provides extensive guidance on how pension funds can behave as active
owners, but again stops short of recommending reporting by funds
themselves. Even the recent (and impressive) Declaration on Climate
Change from the UNEP Finance Initiative contains no commitments on
disclosure from the signatories as investors.
It is unlikely
that this discrepancy will last long. As owners, investors bear the
ultimate responsibility for both the financial and environmental
performance of companies. Investor credibility could be tarnished if
the same institutions urging companies to reduce their carbon exposure
are simultaneously ramping up the emissions associated with their
investments. Just as funds now routinely report how they vote on behalf
of their clients, there is no reason why they can’t report on carbon as
well.
Encouragingly, movement to investor disclosure has now
started. In the UK, Henderson is in the third year of publishing
results of an independent ‘carbon audit’ of some of its SRI funds. In
Sweden, Banco has audited its funds and offset the emissions associated
with two of its SRI funds.
These initiatives show that
investor disclosure is possible, material and necessary. With the UK
climate change minister Ian Pearson backing an initiative with the
Carbon Trust to develop a standard to measure the carbon emissions of
goods and services, the writing is on the wall: funds will soon be
routinely scrutinized for their carbon performance.
Nick Robins is head of SRI Funds at Henderson Global Investors.
