USS has been looking at climate change as an investment issue since the summer of 2001 when the fund published groundbreaking discussion paper Climate Change: A Risk Management Challenge for Institutional Investors (and Summary Report). Further resources for trustee can be found in our Tools for Pension Funds and Trustees Section.
The RI team undertakes research to assist portfolio managers in the integration of climate change factors into their investment analysis, including projects on clean tech opportunities and emissions trading.
As outlined in more detail on the property section of the site, the fund holds direct property investments and manages these to minimise the impacts of climate change with specific targets relating to energy performance data (in addition to other sustainability indicators).
The fund invests approximately $250m (Nov 2009) in clean tech and renewable energy assets through listed and unlisted asset ownership.
Whilst the fund has developed USS’ internal capacity in this area, much of its activities on climate change take place in collaboration with other institutional investors, such as the Institutional Investors Group on Climate Change (IIGCC), Carbon Disclosure Project and in 2008/09 on adaptation. Further details on USS involvement in these collaborative endeavours can be found in the RI Activity Reports and below.
Institutional Investors Group on Climate Change
The IIGCC is a forum for collaboration on climate change for European investors which USS helped to establish in 2001. The group’s objective is to catalyse greater investment in a low carbon economy by bringing investors together to use their collective influence with companies, policymakers and investors. The group currently has over 50 members.
USS sits on the steering committee of the IIGCC, and actively participates in many of the group’s activities
IIGCC has a strong focus on public policy and provides a forum for policy makers to better understand the linkages between institutional investment. The group encourages governments to adopt policies that provide incentives to reduce greenhouse gas emissions, investment in solutions to climate change and emphasises the importance of policies that encourage appropriate responses to the physical impacts of climate change. The group responds to public policy consultations and convened an Investor Statement on Climate Change in the lead up to the international negotiations in Copenhagen in December 2009, to which USS was a signatory.
IIGCC has prepared guidance for trustees on climate change such as, Climate Impact Reporting for Property Investment Portfolios, A Changing Climate for Property Investments: A Trustee’s Guide and A Climate for Change: A trustee's guide to understanding and addressing climate risk. Further resources for trustees can be found in our tools for pension funds and trustees section.
The group has also developed Global Climate Disclosure Frameworks for industry sectors (including automotive and electric utilities) which outline investor expectations for companies to disclose material information on climate change strategy and quantitative data related to exposure to climate change. This compliments the data calls from the Carbon Disclosure Project (see below), in which USS also participates.More publications and information about the work of the IIGCC can be found at www.iigcc.org
Adaptation: Managing the Unavoidable
Since 2007, USS has been working in collaboration with three institutional investors (Henderson Global Investors, Insight Investment, Railpen Investments) and climate change specialists, Acclimatise, to look at the investment implications of adapting to climate change (referred to as ‘adaptation’).
In November 09, the collaboration, launched “Managing the Unavoidable: investment implications of a changing climate”.
The report argues that companies and their investors are failing to take climatic changes properly into account in their investment decisions. It builds on four sector specific reports commissioned from Acclimatise in 2008 (on Oil and Gas, UK Commercial Property, UK Energy Generation and UK Water Sector*) and 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.
Carbon Disclosure Project
USS has been a signatory to the Carbon Disclosure Project (CDP) since its first iteration in 2002. CDP provides a framework for corporations to provide key climate change data on behalf of 475 global institutional investors, with more than US $55 trillion in assets under management (as of 2009). CDP collects data from 2,500 major corporations around the globe. The CDP process encourages companies to analyse their exposure to carbon and climate risks, and provides investors with information that may be useful in both investment decision-making processes and engagement. CDP also works with multinational organizations to facilitate the collection of climate change relevant data for their supply chains. Corporate responses to CDP include:
- Comprehensive corporate GHG emissions data.
- Information on corporate emissions reduction targets and energy use.
- Information on risks and opportunities companies face from climate change.
- Management discussion and analysis on strategies to address climate change – including emissions trading.
Other
In addition to the above USS works with:
- The Carbon Trust - a Government initiative to accelerate the move to a low carbon economy, working with business and public sector bodies to cut carbon emissions and commercialise low carbon technologies.
- Prince Charles’ P8 Group, which brings together senior officials from leading public pension funds to develop actions relating to global issues and particularly climate change
- The Sustainability Committee of the Royal Institution of Chartered Surveyors (RICS) - A Co-Head of the RI team participates on Sustainability Committee which considers climate change and the property sector, amongst other sustainability issues.
- UN Investor Summits on Climate Risk - a series of investor summits convened by CERES to bring together leading institutional investors, state treasurers, and financial services firms worldwide to consider the scale and urgency of climate change risks and to analyze emerging investment strategies and opportunities.