(A correction to this article was made on July 5, 2011)
Colonial First State Global Asset Management, which manages about $152 billion*, says funds should wait for government regulations before starting to hedge carbon risks.
“To change your asset allocation prior to a scheme being put in place is being sustainable but forgetting the investment,” says Amanda McCluskey, Colonial’s head of sustainability and responsible investment, referring to Australian equities.
McCluskey says active managers need to be modelling the potential impacts of government policy.
“One thing that we do is to measure the carbon exposure of all the managers in our portfolio,” says Craig Turnbull, chief investment officer of the $6 billion Local Government Super. “It is one thing we consider when selecting managers.”
Craig Turnbull says a lack of government regulations makes hedging a portfolio against carbon intensive assets risky.
“If we knew what the regulations were going to be than we could determine what the impacts were and it wouldn’t be as risky,” says Turnbull. “We think about reducing our climate change risk in every part of the portfolio and of course one way to do that is to reduce your carbon exposure.”
LGS’s assets include about $3.1 billion that is invested in responsible investment strategies that take account of environmental, social and governance factors.
*CORRECTION: Corrects funds under management to about $152 billion.