Global warming undeniably greatly impacts the environment, the economy, modern societies and future generations. According to the Intergovernmental Panel on Climate Change, most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in greenhouse gas emissions 1. EFAMA supports the goal of the next Conference of Parties (COP 21) to find a new international agreement which would aim to keep global warming below 2 degrees Celsius. In this context, we would call on policy makers to ensure a stable regulatory framework which would provide the private sector, including the investment community, with a longer pattern of confidence to allow the necessary capital flows towards transitioning to a lower carbon intensive world.

Asset managers, as fiduciaries for their clients (retail or institutional investors), invest in the best long-term interest of their investors / clients and are aware of the environmental, social and governance (ESG) criteria, including climate change challenges, which can influence investment performance. Many of the industrys investors feel a responsibility to take part in addressing this issue by being more selective in their investments. In listening to its clients and providing them with investment solutions to achieve their objectives, the European asset management industry contributes to efforts limiting climate change and is committed to supporting the global target of raising USD 100 bn p.a. in climate finance by scaling up their climate investment activities in accordance with investor demand 2.

Asset managers are increasingly developing a range of responsible investment products for institutional and retail investors and offering investment solutions contributing favourably to the fight against climate change by, for example:

Widening the supply of thematic green funds
Developing the supply of low carbon portfolios
Innovating with new investment solutions favouring energy transition (green bond, impact bonds, climate bonds)
Scaling up blended finance through public-private partnership funds for climate change mitigation and adaptation

Dialogue with clients, especially with institutional asset owners, has supported the mainstreaming of ESG considerations, including climate change, in portfolios. Asset managers are committed to transparency and are developing practices to measure and report activities for managing the impact of climate change on portfolios.

In addition, asset managers seek to take into account elements of climate change risk in investment decisions by, for example:

Developing climate change analysis applied to portfolio management with an emphasis on the CO2 performance of issuers before investment, or using broker research reports on climate change analysis which is then applied to the portfolio
Engaging as shareholders on behalf of their clients with investee companies
Identifying, measuring and reporting on minimum CO2 savings of alternative sustainable investments

Asset managers are also adopting transparency standards (for example, certification and labelling) which can create a better awareness of the market in relation to climate change criteria in the investment processes and have started to develop proprietary carbon accounting methods for alternative investments.

The more widespread engagement by asset managers and asset owners with investee companies on climate change criteria has contributed to raising standards and transparency on tackling climate change.

Asset managers are progressively improving transparency practices and helping companies consider climate risk as important for their future by, for example:

Reinforcing dialogue with companies to improve their management of the climate change risk and favour the data release of CO2 impact of their businesses and products to measure their efforts for a reduction of CO2 emissions
Supporting initiatives such as Carbon Disclosure Project (CDP), Institutional Investors Group on Climate Change (IIGCC), Global Real Estate Sustainability Benchmark (GRESB) which aim to improve CO2 reporting by companies

Consideration of climate change criteria in portfolio management and efforts to prove materiality of RI strategies, i.e. the extent to which they affect corporate financial performance, has created more awareness amongst companies of the financial sectors commitments in this field.

EFAMA - European Fund and Asset Management Association
rue Montoyer 47, B-1000 Brussels

Tel. +32 (0)2 513 39 69
info@efama.org