Climate change issues in fund investment practices

There has been a marked development in the way that institutional investors address environmental, social and governance (ESG) issues in their investment practices. For public and private investors alike, these issues have now become part of mainstream investment practices, reflecting a greater understanding that they represent material risks and opportunities that must be addressed as part of fiduciary duty. Some ESG issues require an approach that goes far beyond the traditional simple screening approaches that the early niche funds employed. This is illustrated through a detailed discussion of investor practices on climate change, which must include an assessment of long-termrisks and opportunities and of the strategies that have been put in place to address these. It is also argued that as the role of policy and regulation is critical to shifting the economics in favour of low carbon investments, a structured dialogue between investors and policy-makers is critical to ensuring that institutional capital is mobilized to support the policy goals of limiting climate change whilst still allowing investors to operate in line with their fiduciary responsibility.