Partnerships at Work - Investor Network on Climate Risk

by Rob Berridge

Walden’s customers and staff are well aware of the investment risks and opportunities associated with climate change. But what about the rest of the institutional investment community? Ceres, a Boston-based nonprofit and partner with Walden on shareholder advocacy initiatives, set out in 2004 to ensure that as many institutional investors as possible are addressing climate change. Since then, Ceres has built the world’s preeminent U.S.-based network of institutional investors concerned about climate.

This group, called the Investor Network on Climate Risk (INCR), presses companies for improved climate practices, promotes sound public policies, and catalyzes investments in clean technologies.

INCR currently includes more than 70 investors who collectively manage over $7 trillion (pre-crash). Members include public pension funds, state and city treasurer’s offices, large asset managers, and social and religious investors. CalPERS and CalSTRS, the two largest U.S. public pension funds, and TIAA-CREF, the largest U.S. private pension fund, are among the largest members.

One of the main ways INCR members work together is through shareholder advocacy. The investors enter into dialogue with companies about managing climate risks and opportunities, file shareholder resolutions with recalcitrant companies, and vote their proxies in favor of material climate-focused resolutions. INCR coordinates these efforts in partnership with the Interfaith Center on Corporate Responsibility (ICCR).

Since 2004, investors working with INCR and ICCR have significantly improved climate policies and practices of more than 50 companies. Many companies, after engagement with INCR, have also spoken out on the need for federal policy to limit greenhouse gas (GHG) emissions.

Walden’s leadership has been invaluable in achieving these results. For example, last year, Walden’s Tim Smith helped INCR draft language for a resolution filed at Legg Mason by the Unitarian Universalist Association. The resolution asked Legg Mason, then the fourth largest asset manager in the United States, to issue a first-time sustainability report, including GHG reduction strategies. The resolution also asked Legg Mason to explain how it is using its voice as an investor to encourage companies to address key environmental, social, and governance (ESG) issues. The resolution was withdrawn after Legg Mason agreed to produce the report. The company is currently hard at work on it, and we expect it to be released soon.

Once companies issue their first sustainability report, they typically then issue regular reports every year or two and seek to continually improve their performance on ESG factors. INCR staff believe that moving large companies onto this path is important for creating economy-wide changes that will help us make the transition to a sustainable culture.

Critical to realizing these economy-wide changes is building support from the investing community for new public policies. A good example of this kind of work took place on November 11, 2008, when INCR joined with similar investor networks in Europe, Australia, and New Zealand to call for a strong, binding, global agreement on climate change. One hundred and thirty five global investors, collectively managing more than $6 trillion, sent the message to heads of state and climate negotiators, detailing elements that investors are seeking in a strong global treaty. They also emphasized that such a treaty should be enacted without delay due to the current financial crisis, stating that “it is too expensive not to act.”

Public policies that address climate change are likely to create a variety of investment opportunities in clean technologies. INCR helps its members to work together to identify the opportunities, and it set a goal in February 2008 of deploying $10 billion in clean tech investments within two years.

The Investor Network on Climate Risk, Walden, and other INCR members have achieved impressive results so far, but we have a long way to go in truly addressing the risks of climate change. INCR’s plan is to keep firmly in mind the old adage: “If you want to go fast, go alone. If you want to go far, go together.” And sometimes, when a team works together as well as ours does, you can strive to go both fast and far!