The sustainability trend among institutional investors is gathering pace with Mercer publishing a note announcing it was “seeking innovative and experienced managers with a compelling investment case to help our clients implement their sustainable strategy”.
Helga Birgden, Mercer’s head of responsible investment, Asia Pacific, who wrote the note, says that Mercer’s research over a number of years has uncovered compelling return and diversification benefits, particularly in the unlisted space.
She says: “In Mercer’s 2011 research, ‘Climate Change Scenarios – Implications for Strategic Asset Allocation’, we concluded that allocations to climate-sensitive assets offered some hedge against varying climate change scenarios as well as providing strong upside potential. The 14 asset owner partners who participated in this research are acting accordingly – as demonstrated in the follow up ‘Through the Looking Glass’ report released in January 2012. One-third of these asset owners have decided to allocate more to climate-sensitive assets and another half indicate they may do so in future. This is supported by the 2010 PRI Report on Progress, which indicated 42 per cent of respondents (both asset owners and investment managers) were making some kind of allocation to climate change-themed investments.
“Resource risk has also been highlighted in the ‘World Economic Forum Global Risks 2012’report, where over 469 representatives from government, academia, civil society and industry were asked to identify the relative impact and risk likelihood for 50 identified risk factors (over the next 10 years). The survey found that five of the eight most likely and high impact risks are: water supply crises, food shortage crises, extreme volatility in energy and agriculture prices, rising green house gas emissions and failure of climate change adaptation.”
As reported in last week’s IO&C News, this year’s ‘World Economic Forum Global Risks’ report has elevated water supply crises up the risk ladder.
Mercer’s latest note lists the various investment opportunities under various sample themes: alternative energy; energy efficiency; water infrastructure and technologies; pollution control; waste management and technologies; resource management; environmental support and; other assets, such as climate and green bonds and impact investing.
The reports are available on the responsible investment section of the Mercer website: www.mercer.com/ri