Markets aren’t correctly pricing in climate risks, say investors

The majority of sustainable investment professionals are unsatisfied with corporate disclosures on climate change, according to a survey from the Global Sustainable Investment Alliance (GSIA).

Globally, 59% of respondents to the Sustainable Investor Poll on TCFD Implementation said they were “very” or “somewhat” dissatisfied with the climate-related disclosure of publicly traded companies. Only 16% said they were “somewhat satisfied,” and not a single respondent said they were “very satisfied.”

The negative sentiment was particularly strong in the U.S. (77% “very” or “somewhat” disatisfied) and within service providers and asset managers (67% and 63%, respectively).

Almost nine in 10 survey respondents (87%) said they don’t believe markets are consistently and correctly pricing climate risks into company and sector valuations. Disbelief was highest in the U.S. and U.K. (97% and 95%, respectively) and lowest in Japan (77%). Only 2% of respondents expressed any belief at all (6% of Canadians and 4% of Europeans).

The overwhelming majority of respondents (92%) agreed the TCFD recommendations are helpful, yet only 34% said they have already incorporated TCFD disclosures into their investment analysis. However, one quarter of respondents (26%) said they plan to incorporate the recommendations into their analysis by the end of next year. An additional 9% plan to do so eventually, but implementation will extend past 2020.

Respondents in the U.S., U.K. and Australia were most likely to have already incorporated TCFD disclosures (50%, 47% and 42%, respectively). More than one quarter of respondents (27%) do not plan to include TCFD disclosures into their investment analysis.

In contrast, the percentage of survey respondents who were already reporting in line with TCFD recommendations is only 16%. However, stated intentions indicate positive momentum, with 19% saying they plan to do TCFD reporting in 2020 and 28% exploring the possibility.

Respondents included 272 investment professionals who practice sustainable investing in Australasia, Canada, Europe, Japan, the U.K. and the U.S.

Read the full Sustainable Investor Poll on TCFD Implementation.

Maddie Johnson

Maddie is a freelance writer and editor who has been reporting for Advisor.ca since 2019.