Movement Towards Climate Risk Transparency
Increased Disclosure of Climate Related Information of Portfolio Companies
Investment institutions and asset managers have made strides towards greater transparency regarding financial climate risks of portfolio companies. CalPERS and CalSTRS, two California based pension funds that are the largest public pension funds in the US, are now required to annually report the financial risks relating to climate factors of their investments, as per the passing of Senate Bill 560 by the California Senate Public Employment and Retirement Committee on April 25th. This is not CalPERS first attempt to raise the importance of climate factors in investing; earlier in April they stated their desire for directors of their portfolio companies to have experience in climate change and its related fields. This statement was a first for institutons of its kind.
CalPers and CalSTRS are at the forefront of climate change for institutional investors, recognizing that climate change poses risks within their investment portfolios and that these risks, whether as physical, regulatory, or relational need to be mitigated.
Similarly, on a non-govermental level, BlackRock Inc recently voted in favor of a proposal that would require Occidental Petroleum Corp to include climate change factors in reports to shareholders and the proposal would ultimately pass. This vote cast by the largest asset management company in the world is another indicator of a shift towards environmentally conscious investing. The passing of a proposal of this nature for an oil company the size of Occidental was unprecedented, and appears to only be the beginning of BlackRock and other corporate investors’ dedication to increased climate risk disclosure from the companies they invest in.
"…concerns over climate change are mounting on financial markets. In September 2016, the largest asset management firm in the world, BlackRock, with $5 trillion under management, released a report where it stated climate change is a material risk and 'climate-proofing portfolios is a key consideration for all asset owners.'" said Emilie Mazzacurati, CEO for Four Twenty Seven