Climate-related investment practice is on the verge of rapid change.

Fiona Reynolds, Managing Director, PRI

This is occurring as a result of more certainty in climate science (aided by agreement by the experts) and increased realisation of the potential impacts including impact to our cities). The advancing but fragmented government policy change and prospective changes in financial regulation in also helping and developments across technology (including advances in scenarios analysis applied to climate), changing company practices, community attitudes, research efforts by economic and investment think tanks are all playing their supporting roles.

Effective mitigation of climate risks, slowing the global emissions trajectory, effective implementation and resilience measures cannot be separated from economic structures, business models, national and international capital and investment flows.

The PRI recognises that collective action by governments and nations will be most effective if asset owners and managers are supporting sound measures aimed at accelerating climate action at every level and this is illustrated by the growing support for the 2014 global investor statement on climate change.

Equally as important is Investors being active and aware of the growing impact of externalities and climate related risks to traditional notions of investment value.

Leading investors are responding to these forces with innovative investment practices but examples are the exception rather than the rule.

It is timely for interested investors to collaborate on the investment practice response to these change forces, especially in the areas of reporting and transparency, active ownership, investment allocations (both low carbon and emission intensive) and investment supply chain management. As Liesen et al shows there is further to go on corporate disclosure and that additional disclosure is material to the market as illustrated by Dominquez-Faus et al.

Climate change and resulting water, biodiversity, resource and security risks can best be met if institutional investors take action, confront corporate and stakeholder laggards and look to the best interests of the beneficiaries that have placed their trust in them as fiduciaries and stewards.

In an era where our changing climate has become one of the greatest threats to both society as a whole, business and the long-term profitability and sustainability of companies and markets, the PRI encourages signatories to take action on climate risk. I hope you find the articles within this fourth edition of RI Quarterly both engaging and thought provoking and I invite you to join us at this year’s Academic Network Conference in Montreal from 22-24 September where over 30 new academic papers on responsible investment will be showcased.

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    RI Quarterly Vol. 4: Focus on climate

    September 2014