The International Centre for Pension Management (ICPM) has put out a paper on climate change and on the difference it makes for investments.

The issue of climate change has, in recent years, gone from “being considered a niche issue to one of potentially major financial consequences for all investors,” one that has already impacted and will increasing impact “companies, investment portfolios, and capital markets.”

There are three particular issues that asset owners, including pension funds, must face: climate change is driving physical and policy changes; stakeholders increasingly expect that pension managers will address the issue; and the Task Force on Climate-related Financial Disclosures (TCFD) has raised expectations both on disclosures and on related behavioral changes over time.

The TCFD was created in 2015 at the initiative of Mark Carney, Governor of the Bank of England and chairman of the UK Financial Stability Board, and Michael Bloomberg, former mayor of New York City (2002 – 2012) and CEO of Bloomberg LP.

10 Actions

The ICPM report was written both by and for pension fund managers, and it is organized by the 10 potential actions that such managers can take to integrate climate change into their investment process. The actions are:

• Bring your board and the organization as a whole to climate competence;
• Establish appropriate governance structures and processes;
• Create a common understanding across the fund as to how and where this global change may affect asset values;
• Understand where you are—how the fund is currently managing risk and availing itself of opportunities;
• Set objectives and strategy;
• Communicate objectives and strategy both internally and externally;
• Integrate climate change into existing risk management processes;
• Start with small steps to gain experience and build knowledge;
• Define and measure progress;
• Monitor movements (for example, in regulations and technology) and ensure that the strategy moves along with them.

Read more All About Alpha