If a Trump administration won't fight climate change, and the federal government's previous efforts weren't really all that groundbreaking, the investment community could be at the forefront of actions against environmental and climate threats.
And that, in turn, could save retirement funds.
So says a Huffington Post report that points out that investors see the risk of climate change differently from corporations and the government, especially since "the degradation of asset value driven by climate change does not have a prospect of rebound."
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Such asset classes as coastal real estate, fossil energy resources and numerous others with the potential to be affected irrevocably by climate change introduce risks into pension funds and other investments that could have catastrophic consequences.
Institutional investors, such as pension funds, could prove to be the most compelling agents for change in the approach to climate change as they seek to protect the assets in their care from undue risk.
According to the report, this year even the Church of England, whose holdings include significant shares of ExxonMobil, "pressed the company for more information disclosure on the risks of climate change."
In addition, also in England, Financial Stability Board Chairman Mark Carney has also "called for additional scrutiny of firms' climate change risks" and, continuing a more than decade-long policy, "CDP, a U.K.-based nonprofit backed by institutional investors that handle over $100 trillion in combined assets, has been requesting large corporations and its suppliers to report how they are coping with the risks of climate change."
While traditional divestment strategies in socially responsible investing may not have all that much of an impact if other investors are willing to step up and buy what they're selling and the industry under scrutiny continues to produce profits, new SRI strategies are seeking a more active role in affecting company behavior.
Three of those strategies are bilateral agreement, targeted investment within a sector, and active engagement.
The report points out that such strategies can have substantial effects, even without the backing of regulatory requirements or laws.
It highlights Thomas DiNapoli, comptroller of New York State, who won bilateral agreements with multiple corporations requiring them to report the steps toward reducing 80 percent of their greenhouse gas emissions by 2050.
How did he do that? By dangling the potential for investment by the Common Retirement Fund of the New York State.
And numerous other institutions and officials are following his lead.
In addition, some investment managers are buying shares of companies whose behavior they'd like to change, so that they can have a say in the companies' policies and transform the way they act on various SRI issues.
Considering the about-face in the U.S. government's approach with the succession of the Obama administration by the Trump administrations, institutional investors looking out for pension funds' welfare could be the trump card (no pun intended) in bringing about a new approach to the battle over climate change.
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