| 1. What is the IIGCC? |
The following pages provide answers to common questions concerning the IIGCC, climate, and its investment implications. For further information, please contact the IIGCC’s Programme Director.
The IIGCC is an opportunity for collaboration between pension funds and other institutional investors to address the investment risks and opportunities associated with climate change. The IIGCC’s aim is to identify, promote and demonstrate competence throughout the investment process in assessing and actively managing the risks and opportunities relating to climate change and the transition to a secure climate system.
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| 2. Why Climate Change? |
Climate change is arguably
the biggest environmental risk management challenge facing many of
the corporations in which we invest. It is already affecting
government and fiscal policy and consumer behaviour. So as investors
we need to understand the investment implications of this if we are
to maintain professional standards of investment management.
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| 3. Who are the current members? |
Our current members are listed on
the membership page |
| 4. What are the aims of IIGCC? |
IIGCC seeks to:
- To promote a better understanding of the
implications of climate change amongst its members and other institutional
investors
- To encourage companies and markets in which
its members invest to address any material risks and opportunities
to their businesses associated with climate change and a shift
to a lower carbon economy
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| 5. How does IIGCC position
itself? |
With reference to the table below, IIGCC
seeks to occupy the overlap between “interested investor”
(aware of the implications of climate change) and “responsible
investor” (acting to manage the risks climate change poses
our investments). IIGCC does not seek to become a “campaigning
investor” (advocating immediate or otherwise radical changes
in energy and economic activity).
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| 6. How does the IIGCC work? |
To avoid becoming just another “talking shop”, IIGCC operates through focused workstreams which concentrate on key areas of interest to members. These currently stand as: property; investor and company engagement; public policy and organisational development.
IIGCC recognises that most pension funds do not have resources to devote to climate change initiatives or the capacity to undertake IIGCC workstream activities. For this reason, workstream coordinators are likely to be drawn from fund management members who have specialist in-house staff, whilst pension fund members will provide a governance/oversight function.
Members with in-house SRI capacity also bring technical knowledge and experience of engagement on a wide range of environmental, governance, social and ethical issues plus access to specialist advice and consultancies. These are just some of the benefits and strengths of IIGCC collaboration.
IIGCC adopts a “learning by doing” approach whereby members engage in activities, reflect on their impacts, then apply their learning to feed into future activities and priorities. |
7. What are the workstreams
focused on?
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Details of the workshops can be found on this website and will be updated periodically. |
| 8. Why should pension funds join
the IIGCC? |
Pension funds as long term
investors with liabilities well into the future are the most likely
to be exposed to the impacts of unchecked climate change. We
and our members are amongst those with most to lose if companies and
markets are negatively affected by either direct impacts of climate
change or the political response to it. And pension fund members
need a safe and healthy world to retire into. If we can play
a small part in helping to make that possible, we should. Climate
change is a risk which is consistent with our time-frame of interest.
However fund managers have many reasons for focusing on shorter time-frames.
We think pension funds have a fiduciary duty to do what they can to
ensure that fund managers are taking the longer term risks associated
with climate change into account. In addition, many pension
funds state their commitment to taking environmental risks and opportunities
into account within their SIP. These factors, plus the added
value from speaking with a joint voice, present a strong argument
for pension funds joining IIGCC.
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| 9. Is climate change really
a risk to investments? |
The consensus opinion of scientific
evidence is that climate change is happening and that our current
patterns of industrial development are a major contributing factor.
On this issue, as with other technical issues, investors tend to go
with consensus scientific and governmental opinion. The risks
to investments could be direct, through deterioration of the physical
environment, or indirect through changes in the regulatory or fiscal
environment within which companies operate. Many governments
have already started to take action and this will affect company risk
and asset value. Conversely there are also opportunities for
investors. For example through investments in product development
(possibly using low carbon-related technologies), greater energy efficiency
(which would reduce costs) or through improved corporate reputation
(i.e. from those companies seen to do something about a growing global
risk). Many of the companies are already beginning to take steps
to address climate change risks and are making decisions based on
the assumption that climate change will affect their business.
For investors to be less informed than they are does not seem appropriate.
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| 10. Is the media picking up
on this issue? |
Recently, the Environment Agency
Pension Fund was attacked in a front page article in the Independent
(http://www.independent.co.uk/story.jsp?story=367027)
for investing in companies that contribute to climate change.
Whilst the Environment Agency pension fund is in a particular position
vis a vis climate change, the article raises the potential that the
media (and the journalist was the chief political correspondent) will
generate political and NGO focus on fund management of this issue.
In defense of these criticisms, the EAPF cited membership of the IIGCC
as evidence of their commitment to addressing these concerns and as
part of their strategy for increasing their understanding of the implications
of climate change. |
| 11. Our fund manager says they
are already addressing climate change. Why do we need to join
this group? |
IIGCC doesn’t substitute
for individual fund managers taking action – but it leverages
each manager’s effort so that the sum is greater than the parts.
Climate change is such a complex issue that no fund manager would
claim to be able to “solve” it alone. IIGCC will help
to share experience and understanding. IIGCC will also help
ensure that companies are not being pulled in different directions
because of a failure by investors to co-ordinate. If a pension
fund wants to encourage collaboration to maximize the impact responsible
shareholders can have and be sure that their fund manager is really
operating to best practice standards on the full range of activities
related to climate change, IIGCC is the best vehicle to do this.
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| 12. Isn’t IIGCC trying
to do what governments should be doing? |
Without evidence that investors
and companies are willing to take their share of responsibility for
leading change, it is unlikely that the voluntary approach that governments
are currently adopting will last. Furthermore, climate change
poses new risks and new opportunities for companies and if investors
are well-informed about these, we will make better decisions.
Investors can either encourage companies and markets to make a planned
response to this issue or encourage companies and markets to adopt
a wait-and-see approach which forces crisis change. We believe
our responsibilities as fiduciaries, let alone as “responsible
owners”, are better served by being proactive.
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| 13. Is it wise to get involved
in such a “political” issue? |
Investors must do what they
can to manage risk and be responsible owners. Political aspects
contribute to the risk, but to remain engaged will help to manage
the risk. Climate change is not unique in its sensitivity –
director remuneration, health & safety standards, human rights,
bribery & corruption are also politically sensitive issues. However we cannot afford to ignore them just because of such sensitivity.
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| 14. Isn’t this a global problem?
Is IIGCC going to become an international group? |
Climate Change is a global
issue and companies already face different regulatory frameworks internationally.
However, to maximise the impact and efficiency in our most immediate
markets, IIGCC will not actively seek to recruit members from outside
Europe at this stage. Rather, it will seek to work with regional
groupings of investors wherever possible.
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| 15. How much does it cost?
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Membership fees apply to all IIGCC members. The following membership fees apply from 1st January 2008 and are subject to review at a full meeting of the Group.
| Assets/Funds under management
> £10bn: |
£3,500 |
| Assets/Funds under management
>£5bn, <£10bn: |
£2,500 |
| Assets/Funds under management >£1bn, <£5bn: |
£1,500 |
| Assets/Funds under management
<£1bn: |
£1,000 |
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| 16. Why should non-profit making
pension funds pay for this? Isn’t this what we pay our
fund managers to do on our behalf? |
The fees have been kept to a minimum. Without an income, IIGCC will be unable to undertake activities to forward its goals. The best way for pension funds to have a say in the governance of the IIGCC and encourage more fund managers to get involved is to demonstrate genuine commitment and help enable project work. Payment of a membership fee will serve both these purposes. |
| 17. Who will decide how the
money is spent? |
Operational decisions are made by the Steering Committee. Details of the organizations governance and structure are outlined in the IIGCC’s constitution. The Steering Committee reports in writing to the full membership after each meeting and in person at least annually when the whole membership comes together.
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| 18. How many meetings should
I expect to attend? |
All members of the IIGCC should
attend at least one full IIGCC meeting per year. Members should
also indicate an active or governance interest in at least one workstream
and be willing to attend at least the annual meeting for that workstream.
The annual meeting will report on the previous year’s achievements
and set plans for the coming year. No assumption is made about
active participation from pension funds though this would be welcome.
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| 19. Who can join? |
Membership of IIGCC is open
to any institutional investor who supports the aims and positioning
of the IIGCC and is willing to be involved in at least one IIGCC workstream.
A request for membership should be made in writing and the letter
should be signed by a director or equivalent of the company. New members will be accepted by a simple majority of a quorate Steering
Committee meeting.
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| 20. Once I sign up, who has
the right to speak on behalf of my organisation? |
Communication with the external
world will be undertaken with sensitivity to the full spectrum of
IIGCC members. Communications about IIGCC as a whole will be
handled by the Chair or other members of the Steering Committee.
The coordinator of the workstream will handle communications about
the workstreams. Members of one workstream may make known to
appropriate external parties the other active members of that workstream.
Members of other workstreams should not be identified, in line with
this being a “sign on” network where active members will
speak for themselves or through their workstream coordinator.
Members are encouraged to put forward
IIGCC positions (either overall or workstream related) and should
ensure they have current briefings to do so. If their individual
organisations have significantly different positions, they are asked
to alert the Steering Committee in advance and to make clear that
they are putting forward their own organisation’s view and
not that of IIGCC’s. Equally, members should not comment
in public on the activities of a workstream of which they are not
part.
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| 21. What have people said about
IIGCC? |
”Joint action by investors,
to engage with both companies and policymakers and with a clear focus
on reducing greenhouse gas emissions, brings a powerful new approach
to the attempts to mitigate climate change.” The London
Principles, The Corporation of London, 2002.
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