Nearly half of the world’s largest investors are disregarding climate risks entirely, according to the Asset Owners Disclosure Project (AODP).
AODP’s annual Global Climate 500 Index, which tracks the 500 largest funds in the world, found that 246 investors managing $14.3 trillion are doing nothing to address the investment risks related to climate change.
AODP CEO Julian Poulter described the findings as “shocking,” adding that these asset owners were “gambling with the savings and financial security of hundred of millions of people around the world and risking another financial crisis.”
Of the funds that scored the lowest on AODP’s index, the largest were predominately sovereign wealth funds from oil-producing nations and Asian insurers, including the Abu Dhabi Investment Authority, which manages approximately $773 billion, and Japan Post Insurance, worth $602 billion.
“I would encourage all of them to pick up the pace and ramp up their ambition in respect to a low carbon transition,” said Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change. “It is the key to reducing risk and securing the health of their portfolios now and over the long term.”
While a large portion of asset owners had not addressed climate risk, AODP reported, the majority (51%) have taken at least some action in response to climate change. Nearly a fifth are taking “tangible action” to mitigate climate risk, while another 157 (31%) are taking the first steps.
“Climate change risk is now a mainstream issue for institutional investors and last year has seen many significantly step up their action to manage this,” Poulter said.
Scandinavian asset owners scored the highest in climate risk mitigation, with Sweden coming in first for country performance. Norway ranked second, while Denmark was fifth.
Of individual funds, the UK’s £2.9 billion ($4.2 billion) Environmental Agency Pension Fund topped the rankings, followed by the $7.1 billion Local Government Super in Australia. Other leaders included Sweden’s AP4, Dutch pension ABP, and the New York State Common Retirement Fund.
Source: AODP’s “2016 Global Climate 500 Index“
Related: ESG Still Not a Priority for CIOs & Why Investors Can’t Ignore Climate Change