Increasing interest in climate change from investors generates improvements in disclosure into business operations and strategies, reports Envido.
A new survey from the Institutional Investors Group in Climate Change (IIGCC) revealed that the proportion of institutional investors who consider firms' climate change policies when making investment decisions has more than doubled in the past two years.
From the 26 leading financial firms included in the IIGCC survey, 60% of asset owners asked climate change-related questions when meeting potential investment managers in 2009, compared to just 30% in 2007. Moreover, 70% of firms surveyed commissioned or supported climate change research, compared to 45% in 2008.
The survey also found the growing interest in climate change policies from firms seeking to attract institutional investors, with 80% of respondents claiming they had actively engaged with companies on issues related to climate change. This includes improvements in disclosure and integrating climate change into business operations and strategies.
However, the continued absence of comparable climate change-related disclosures makes it difficult for investors to formally integrate climate change factors into investment analysis.
Companies understand that more climate change regulations are coming and reputational risks are getting worse.
The report shows that there are clear signs that climate change related risks and opportunities were increasingly informing investment decisions. There is a growing recognition that dealing with climate issues represents good business, and many companies understand that more regulations are coming and that reputational risks are getting worse.
However, few investors were yet willing to withdraw backing for carbon-intensive and polluting projects. Businesses facing high climate risks are still able to attract investment, but investors will factor those risks in and as a result the cost of capital will increase.