Deutsche Asset Management’s institutional climate change investment business is set to introduce risk management measures within its portfolios which will allow it to calculate the portfolios’ total carbon exposure.
Speaking at an AIST (Australian Institute of Superannuation Trustees) luncheon titled “Investing in Climate Change”, Mark Fulton, global head of climate change investment research at DB Climate Change Advisors, said after initially focusing on the investment opportunities, the business was now turning its attention to risk.
“When we started out we focused on the opportunity set, now we are focusing back on the risk element,”
“You as an investor are going to have to know what your exposure is to the carbon issue.”
A survey conducted recently by the Climate Change Institute and AIST on super funds’ attitudes towards climate change found 70 per cent did not have risk management methods in place to calculate their exposures to carbon prices, and 78 per cent did not know the value of the low-carbon assets they owned.
Only 9 per cent were attempting to measure the climate change risks, which range from the physical impacts on assets to the effects of government policies, in their portfolios. However the survey found most funds plan to improve their ability to manage these risks.
Fulton described the energy and material efficiency sector, which includes nanotechnology, demand-side management within buildings and power grid efficiency, as an exciting sector for investors.
He said the “dash for gas” was being considered by corporations and governments in the move to renewable energy, adding that the
UK had “no chance” of hitting its renewable targets without nuclear gas.
While global investment in clean technology rose in 2008, the economic downturn took its toll on the second half of the year. New investment in clean energy totalled just $56 billion in the second half of 2008, versus $66 billion in the first half.
Fulton said the project finance markets had ground to a halt, and while the trend was very good in the long term, investment flows had undoubtedly suffered as a result of the credit crisis.
Global political support remains a key driver for investment returns in both public and private markets, with $26 billion of government money aimed at battery technologies, and 250 new policies worldwide introduced between July 2008 and February 2009 to address the carbon/renewable issue.