Pressure is increasing on the U.S. government and the investment community to address climate change.
Pressure is increasing on the U.S. government and the investment community to address climate change.
Some 450 institutional investors, pension plans and corporate executives called on Wall Street and policymakers to address the issue at a high-profile meeting this month at the United Nations.
Many of those present called on Congress to establish a mandatory national policy to reduce greenhouse-gas emissions and encouraged the financial community to put a price tag on carbon pollution.
In an action plan, they also pushed the SEC to require corporate disclosures of climate risks and said investment managers and consultants should report on how they are assessing climate risks in their portfolios.
The meeting was hosted by Ceres, a Boston-based coalition of institutional investors and environmental groups that work with companies to address sustainability issues, together with the United Nations Foundation of Washington.
Organizers said the event was the largest gathering ever of financial and corporate leaders from around the world to examine the climate-change issue.
Their efforts may be having some effect. Activists at the U.N. meeting were crowing about the announcement early this month that Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley, all of New York, had adopted a set of principles under which they would factor in the risks of carbon emissions, along with mitigation strategies, used by utility clients.
Also this month, Ken Lewis, chief executive of Charlotte, N.C.-based Bank of America Corp., said the bank will start assessing the cost of carbon in its financing decisions.
"This is a seminal change in Wall Street's recognition of this as an issue," Kevin Parker, head of Frankfurt, Germany-based Deutsche Bank AG's asset management division in New York, said during a panel discussion at the U.N. gathering.
Investors want more details, but the Securities and Exchange Commission has "been a source of frustration" to those seeking more disclosure of carbon risk, Denise Nappier, Connecticut's state treasurer, said at the meeting.
She said that Ceres and others have pushed the SEC since 2003 to require more disclosures in 10Ks.
"But we've yet to get clear guidelines" from the SEC, Ms. Nappier said.
INSTITUTIONAL PRESSURE
Meanwhile, U.S. pension funds are beginning to assess consultants and money managers based in part on climate-change issues, she said.
Connecticut just completed a search for a pension consultant and looked for consultants who could assess money managers' ability to take into account climate risk, Ms. Nappier said.
"Never before have we had that kind of discussion," she said.
Many consultants are unprepared for such questions, said Thomas Van Dyck, a San Francisco-based senior vice president and head of the SRI Wealth Management Group at RBC Dain Rauscher Inc. of Minneapolis.
Most advisers tend to dismiss environmental, social and governance issues due to performance reasons, but "with climate change it's more difficult [to ignore] because everyone has an understanding of what it is," Mr. Van Dyck said.
Activists say they want to see managers make evaluations of both the risks and opportunities companies face.
The investment community is starting to provide such information, observers say.
Climate-change issues "have really become much more of a feature in the analyst community," said Julie Gorte, senior vice president of sustainable investing at Pax World Management Corp. of Portsmouth, N.H., adviser to the Pax World funds.
"I haven't seen one [research] report on utilities or automobiles that didn't at least mention who could be vulnerable if [carbon emissions are limited]," Ms. Gorte said.
U.S. LAGS
European investors are much more interested in investing in companies and funds that are addressing climate-change issues, Mr. Parker said at the conference.
His firm's retail fund business had around $10 billion of assets under management in climate-related funds at the end of November, amounting to about 15% of the estimated $66 billion invested in this category globally.
In September, DWS Investments, the asset management arm of Deutsche Bank, launched what it said was the first climate-change fund in the U.S. but that fund has raised only about $50 million from investors.
"That gives you an idea of where we [in the U.S.] are versus overseas" firms in attracting investors, Mr. Parker said at the meeting.
But that could change.
Investment products that purport to deal with climate change are "popping up everywhere," said Joe Keefe, chief executive of Pax World Management.
Green investments are hot right now, Mr. Keefe said, especially alternative energy projects.
"You're seeing the tip of the iceberg of what is going to be a huge industry" in reducing greenhouse gases, Mr. Van Dyck said.
Dan Jamieson can be reached at djamieson@crain.com.
