SHARE recognizes that climate change has implications across investment portfolios. Foundations, pension funds, religious institutions and others are concerned not only with the security of their funds and the prospects for expected investment returns in light of climate risk, but also with its impact on the world around them. The investment decisions made by institutional investors today, and in the near future, will play a crucial role in determining how society fares in the face of climate change.
SHARE’s four “R” approach
Reducing the demand for carbon-intensive energy is a critical part of shifting to a low carbon economy. Reductions in energy use and greenhouse gas emissions by individual companies also save money and indicate efficient management of resources.
While in the longer term addressing climate risk will require shifting energy sources, in the shorter term many environmental and social risks in the energy industry still require immediate remedies. Energy companies create risks from waste generation, excessive water use, methane emissions, and the transport of oil and gas to markets.
Shifting capital into low carbon sources, such as renewable energy companies and infrastructure and green bond, is a key ingredient for limiting global temperature increases. As industries shift to cleaner energy sources, investments in training and employment for workers in resource-dependent communities must also be made.
To support appropriate capital allocation decisions that address climate change and shift to a low-carbon economy, companies and investors depend upon market regulations and policy frameworks. Better policy and regulations are essential to keeping global warming at levels necessary to avoid the most disastrous impacts of climate change.
Numerous approaches can be used to address climate risk in an investment portfolio, from increasing exposure to low-carbon assets, to engaging with corporations on the reduction of their GHG emissions, to divestment from specific companies or sectors. These approaches are not exclusive; together they can reinforce the ultimate aim of keeping global warming below dangerous future levels.
SHARE’s approach to addressing climate risk is based on the understanding that to tackle climate change, we need to shift our whole economy to a low-carbon economy.
Despite growing attention to the physical, financial and regulatory impacts of global climate change, this report finds that companies in Canada’s most carbon-intensive sectors are not demonstrating “climate competency” in the boardroom.
This case study provides examples of Canadian companies connected to US trade associations and the risks that can arise for companies linked to aggressive lobbying.
This brief looks at climate change as a critical economic, political and moral issue for society as a whole, and presents steps that institutional investors can take to address it.
As climate change continues to emerge as a significant issue for Canada’s investment community, SHARE’s report outlines potential climate change-related risks for the banking sector.