The Paris Climate Change Agreement highlights the commitment of countries to address climate change. It reinforces the need for both investors and companies to assess, communicate and manage their climate change risks. The task is not without its challenges.
This paper outlines the approach used by AMP Capital to assess the exposure and risks to global and Australian equity portfolios of greenhouse gas emissions. We also identify some of the key considerations and limitations related to assessing and managing climate change risks. We believe that the metric used to assess risk is critical. The use of an inappropriate metric could potentially lead to the risk not being effectively or efficiently managed.
Disclosure of greenhouse gas emissions by companies is critical for investors. It is also an area in which some companies have a long way to go. In particular, companies need to disclose greenhouse gas emissions based on the equity ownership of facilities and not just those that they operate. Companies, also, need to provide appropriate disclosure to demonstrate that they are assessing and managing their climate change risks; enabling investors to do likewise.
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Author: Ian Woods, Head of Environmental,Social and Governance Investment Research, AMP Capital
Important notice: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. AMP Capital Funds Management Limited (AMP Capital) is the responsible entity of the AMP Capital Sustainable Australian Equity Fund and the issuer of the units in the Fund. To invest in this Fund, investors will need to obtain the current Product Disclosure Statement (PDS) from AMP Capital Investors Limited. The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this document. Past performance is not a reliable indicator of future performance.
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