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ESG and low carbon investing - putting theory into practice

  • Posted by: ,  Chief Executive
  • 09 October 2018
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Climate Change and Low Carbon Investing - the best papers

This week, the UN Intergovernmental Panel on Climate Change released a report which warned of dire circumstances in the fight to keep global warming to a maximum of 1.5 degrees C.  The collective window for governmental and corporate entities across the globe to take action may be slamming shut in just over a decade. 

Whether it’s a moral imperative or merely a fiduciary duty, how should asset owners respond to the issue of climate change?  Below we've included the best papers published on the subject in recent months. 

carbon footprint

Responsible Investing That Reduces Your Carbon Footprint (DWS AM, 2018)
(For compliance reasons, this paper is only accessible in the United Kingdom)
DWS reviews the mounting evidence in favour of ESG investing, the benefits of a tilt towards high ESG ratings, the impacts of divestment vs engagement, and index solutions combining ESG with low carbon methodologies. 

Investors should respond to climate risks and opportunities (ClientEarth, 2018)
This 29-page report provides a summary of currently available evidence and analysis in response to the commonly posed climate-related questions.

Climate Change: Assessing Impact at the Portfolio Level (Neuberger Berman, 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
Climate change is likely to have a wide range of impacts on both financial markets and economies in the coming decades.

Carbon Risk Integration in Factor Portfolios (S&P Dow Jones Indices, Mar 2018)
It is possible for factor portfolios that are carbon-efficient to become a significant part of the core equity tactical and strategic asset allocation process.

A Framework for Pension Fund Action on Climate Change (PLSA, Dec 2017)
Pension funds and other global investors must take climate change considerations into account. This guide discusses potential actions for UK pension funds on governance, reporting, and engagement related to climate change.

Ag in the low-carbon era: Don’t wait 'til the cows come home (Hermes IM, 2018)
(For compliance reasons, this paper is NOT accessible in the United States)
This Hermes blog post looks at the necessity of a new 'green revolution' for the agriculture industry, encompassing micro irrigation systems, 'precision' agriculture technology, agroecology, and a consumer shift to plant-based food. 

Sustainable Investments Handbook: Background Information & Practical Examples for Institutional Asset Owners (CFA Institute Research Foundation)
This publication provides practical insight into sustainable investment approaches, along with case studies from asset owners, and a comprehensive overview of best practices in sustainable investing.

Perspectives on Climate Change (Wellington Management, Feb 2018)
This paper considers a range of issues around climate change, including the 2015 Paris Agreement, scenario analysis, ESG integration and investments for a low-carbon economy.

Climate Change Scenarios - Implications for Strategic Asset Allocation (Mercer)
This paper examines the extent of the widely acknowledged, broad-ranging future effects of climate change on financial markets and economies, identifying actions that institutional investors should consider.

The Big Book of SI (Robeco, 2018)
Robeco's 102-page tome, The Big Book of SI, analyzes the present status of sustainability investing and the big trends that are shaping its future. The book also zooms in on sustainability reporting and the link between ESG and performance.

The Carbon Scorecard (S&P Dow Jones Indices, May 2018)
The S&P Dow Jones Indices Carbon Scorecard was developed to illustrate the degree that major benchmarks are exposed to carbon risks, as well as how quickly the market is transitioning to a lower-carbon economy.

Fossil Fuel Divestment: A practical introduction (MSCI, 2016)
For institutional investors considering the decision to divest fossil fuel holdings, the most common approaches are designed to optimize for carbon reduction, engagement, and stranded asset risk mitigation.

Risks and Opportunities From Climate Change (Cambridge Assoc, 2015)
Climate risk is multi-layered and there are many issues for the truly long-term investor to consider. Some of these are defensive (how to preserve value) and others are offensive (what opportunities does climate change present?)

Climate Change and Fiduciary Duties of Pension Fund Trustees in Canada (2015)
How should climate change be accounted for in the decision-making process of Canadian pension fund trustees and where do their obligations lie?