IAPF Spring 2018 Irish Pensions Magazine

12 | IRISH PENSIONS MAGAZINE | SPRING 2018 EXPERT OPINION take into account ESG factors than the asset owners who oversee those assets (Figure 3). This changing investment landscape will drive the next leg in the evolution and maturing of sustainable investment. To date, attention has focused on generic questions aimed at deciding whether to explicitly consider ESG factors. That debate is becoming irrelevant. In future, the questions will turn towards how managers are approaching ESG factors, the role they play in investment decisions and stewardship duties, and the contribution they make to performance. Climate change exemplifies the challenge Our experience looking at climate change provides a concrete case study of the challenge. We have long considered climate change a key source of investment risks and opportunities. The industry’s recognition of the challenge has also expanded significantly. A string of investor-focused initiatives, such as the Task Force on Climate-related Financial Disclosures, have raised awareness of the challenge. An expanding list of climate-labelled investment products have been launched to tap into the appetite that interest has helped generate. We are concerned that far more energy has gone into manufacturing and marketing investment products than into developing robust solutions to a critical environmental challenge. Despite the huge growth in the information available to investors, the tools most use have not developed significantly in recent years. Carbon footprints, divestment and clean energy investment dominate most investment strategies. Our analysis suggests none are fit for the purpose of managing the myriad complex impacts of structural shifts in the global economy and industries that will reach across financial markets. We have invested in developing tools to measure and help manage the risks investors face, rather than relying on off-the-shelf solutions which provide demonstrably patchy results. Our Climate Progress Dashboard monitors 12 indicators to show the pace of progress toward a low carbon global economy 3 . It compares projections made by international organisations to estimate the temperature change implied by the progress in each area. The Dashboard provides an objective measure of speed of climate change’s transition from a future challenge to current impacts. At the moment, the 3 Please see http://www.schroders.com/en/lu/ professional-investor/featured/climate-change- dashboard/ for more details