A new study from a significant source shows that a majority of large investors are worried about companies' readiness for climate change. The source is significant in that this information isn't just the data, say, of a fringe environmental group - it's asset managers and pension fund managers responsible for a total of more than $11 trillion.
In the study, which was conducted by PwC, investors were asked the questions: "In general, how satisfied are you with the information companies provide (whether through regulatory filings or otherwise) about climate change risks? In your opinion, how well do U.S. corporate boards generally understand climate change risks?"
- 58% of investors responded "dissatisfied."
- The figure rose to 64% "dissatisfied" for those investors with over $100 billion in assets under management.
In short, to coin a phrase, Wall Street is now concerned about Climate Street.
A substantive business risk - I was heartened by these survey results, because they show that despite a pattern of persistent disinformation purporting to help business by denying the existence of climate change, a solid majority of influential investors now want companies to treat climate change like the real business risk it is. I've long maintained that denying the existence of climate change (and ignoring the work of thousands of respected scientists around the world), while arguably helping business in the short term by reducing costs, is actually harming business in the long term by delaying the preparedness many companies need. This study shows that large investors, who live and breathe risk, take the risk of climate change seriously, and expect the companies they invest in to take it seriously as well.
There's an old saying that you never hear the sound of the bullet that kills you. When I was in the corporate world I was for years a member of a risk-focused team whose purpose was to help our company prepare for the unexpected. The team took its mission very seriously, and I've no doubt that today, with the multiple risks that climate change and extreme weather events pose to natural resources, supply chains and operational infrastructures, that topic is high on its agenda.
So I believe it's excellent news that climate change is on the management agenda of the large investors who control trillions. PwC describes the survey respondents as "a diverse mix of institutional investors," with about half pension funds and 40% asset managers. It's easy for organizations to ignore the warnings, for example, of a small not-so-well-funded environmental group. It's not so easy to ignore these same warnings when they come from investors controlling $11 trillion.
I believe it's also excellent news that the resources available to assist companies in their climate resilience efforts are growing all the time. Books such as The Long Hedge, which I reviewed back in March, provide a wealth of helpful information for corporate executives and risk managers. Organizations like UK-based Acclimatise (from which, via
Prudent risk management never goes out of fashion. This study reminds me of the famous old advertising tagline: "When EF Hutton talks, people listen."
My variant of that old slogan: When investors controlling trillions talk, companies listen.
At least I hope they are.
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Victor is author of The Type B Manager: Leading Successfully in a Type A World (Prentice Hall Press).
