Investment consultants questioned over climate change backing
Investment consultants advising on trillions of dollars of assets are failing to back high-profile initiatives calling for more to be done in combating climate change and for companies to disclose how they are dealing with global warming.
Eight out of the world’s top 10 investment consultants or asset managers offering investment advice, including Aon Hewitt and Russell Investments, have not backed a series of recent major climate change initiatives, according to campaign group Preventable Surprises and research group Sustainix, despite the growing importance of the subject to investors.
The poor scorecard shines a light on the role of investment consultancies who generally fly under the radar but exercise huge influence over how pension funds, insurers and charities allocate their funds.
“Investment consultants are so influential — able to substantially sway the opinions of managers and asset owners alike. They must get behind changes to market structures and industry norms,” said David Murray, chief executive of Preventable Surprises. “Without this we won’t address climate change in time and for advisers to long-term investors this should be a matter of big concern.”
The research examined the signatories of three initiatives — Climate Action 100+, which calls on companies to cut greenhouse gas emissions and improve disclosure and oversight of climate-related risks; the Ceres G20 letter, in which large investors urge politicians to uphold the 2015 Paris climate accord; and the task force on climate-related financial disclosures (TCFD), which is backed by the Financial Stability Board, a body that makes recommendations to the G20 group of nations. Leading policymakers and asset managers have warned that understanding and addressing climate change risk is of critical importance to investors.
Of the 10 only Willis Towers Watson signed the TCFD. Preventable Surprises has sent an open letter to the remaining nine, eight of which are headquartered in the US, calling for them to publicly endorse the TCFD recommendations which ask that companies set out the risks and opportunities linked to climate change and how boards are dealing with these issues. “Not to sign sends signals to fund managers and others, and we therefore hope you will take immediate corrective action,” the letters state.
However, investment consultants said they were taking climate change risk seriously when providing advice to clients and argued not signing up to those three initiatives in particular did not signal a lack of commitment to the issue.
“The three initiatives highlighted are all really worthy but there are other initiatives out there,” said Tim Manuel, head of responsible investment in the UK at Aon Hewitt, pointing to its endorsement of other programmes including the UN-backed principles for responsible investment.
Russell Investments, also a signatory of UNPRI and a member of the Institutional Investors Group on Climate Change, an organisation in Europe, said it was an “advocate for best practices in ESG investing”. Mercer, which supported the Ceres G20 letter, said it “continue[s] to review other related initiatives that constructively advance ideas and solutions to this critical issue”.
Amin Rajan, chief executive of asset management consultancy Create Research, expressed surprise that more consultancies had not signed on to recent proposals but added there had been many similar-sounding proposals in recent years. “There have been so many initiatives in this area. [They may argue] judge me by what I do rather than what I say,” he said. The other six sent letters by Preventable Surprises are Cambridge Associates, Callan Associates, Nomura Securities, RVK, Wiltshire Associates and Pension Consulting Alliance.