“A changing climate is one of the most serious long-term issues facing companies, both in the UK and globally and is likely to have an impact on company assets, operations, logistics, supply chains, and employees…Companies that are well prepared for the impacts of a changing climate will be well-placed to maximise opportunities, minimise costs, and protect and enhance common assets…

...I welcome ‘Managing the Unavoidable’ as a valuable contribution towards our efforts in adapting to the risks and opportunities from a changing climate, and look forward to further collaboration with the investment community in the future.”

Hilary Benn
Secretary of State for Environment, Food and Rural Affairs

Climate change threatens corporate balance sheets

In January 2008 Henderson Global Investors, Insight Investment, Railpen Investments, and the Universities Superannuation Scheme (USS) issued a report ‘Managing the unavoidable: understanding the investment implications of adapting to climate change’. The report highlighted a number of issues regarding the implications of inevitable climate change for business, these included:

• Lack of attention on the now unavoidable impacts of climate change that may have significant long-term implications for companies and their investors.
• Tools need to be developed to aid companies and investors in understanding the risks and opportunities from climate change.
  Climate change risks need to be incorporated into investment analysis and decision-making as they may affect the timeframes over which investment decisions are made.
• Investors need to engage with companies and policy makers to ensure appropriate climate change adaptation systems are in place and that the views of long-term investors are taken into account in policy formation.

The new report ‘Managing the Unavoidable: investment implications of a changing climate” argues that companies and their investors are failing to take climatic changes properly into account in their investment decisions. The report, produced by Henderson Global Investors, Insight Investment, Railpen Investments, and the Universities Superannuation Scheme (USS), with specialist input from Acclimatise, builds on four sector specific reports commissioned from Acclimatise. It calls on investors to ensure that companies have clear strategies for responding to climate change and reporting on risk assessment processes. It also urges investors to play a much more proactive role in public policy debates on adaptation, highlighting a need to develop long-term policies which enable companies to plan and invest appropriately.

The four sector reports each have a UK company focus to:

• Provide a high-level review for investors and analysts of the climate risks and opportunities for businesses.
• Identify the specific investment drivers at risk.
• Provide guidance on questions investors and analysts should ask of companies to encourage further disclosure.

Seb Beloe, Head of SRI research, Henderson Global Investors: “...incremental changes are already starting to affect operational costs and, in some cases, asset values…we as investors need to pay much greater attention to how climate change/weather affects our investment decisions.”

David Russell, Co Head of Responsible Investment, Universities Superannuation Scheme: “Most companies see climate change primarily in terms of downside risk management. However, from an investment perspective, climate change may also present opportunities.”

John Firth, CEO and Co founder of Acclimatise: “Investors will need to assess how they integrate climate change-related risks and opportunities into their investment analysis and decision-making processes.”

Click on the following link to see Rory Sullivan, Head of Responsible Investment, Insight Investment discussing the report findings in a video produced by FT.com: ‘Managing the Unavoidable’.

All of the ‘Managing the Unavoidable’ series of reports are available for download from the panels on the right-hand side and the full press release can be downloaded here. We have also compiled a list of other financial services reports that you may be interested in, these can also be accessed from the panels on the right-hand side.

Next steps…

These reports are intended to support the development of an informed dialogue between investors, companies and policymakers about the direct and indirect impacts of a changing climate on business. Comments are invited from those interested in the investment implications and an online survey will be created in due course to enable feedback. For further information on this project please contact:

John Firth CEO Acclimatise j.firth@acclimatise.uk.com +44 (0) 1623 884347	David Russell Co Head of Responsible Investment Universities Superannuation Scheme drussell@uss.co.uk +44 (0) 20 7972 0300
Rory Sullivan Head of Responsible Investment Insight Investment rory.sullivan@insightinvestment.com +44 (0) 20 7321 1875	Seb Beloe Head of SRI Research Henderson Global Investors seb.beloe@henderson.com +44 (0)20 7818 5234
Frank Curtiss Head of Corporate Governance Railpen Investments frank.curtiss@rpmi.co.uk +44 (0) 20 7256 8003