AllianceBernstein is sending the finance professionals who handle its $581 billion in assets under management back to school — climate school.
The global firm is creating what it’s calling a first-of-its-kind curriculum focused on climate risk and investment performance with Columbia University’s Earth Institute, home to the respected Lamont-Doherty Earth Observatory research center.
All investment teams at AB will enroll in a pilot program over the next year to learn how to evaluate companies’ risks and opportunities associated with rising sea levels, wildfire hazards, predictive modeling for extreme weather and other potential consequences of climate change. The push means that asset managers will more directly work with scientific findings and raw data rather than rely on third-party firms for what may already be filtered analysis. The firm hopes to use feedback from the program to enhance the curriculum so that it can serve as a model for the broader investment industry.
“Assessing and factoring in climate risk in a more comprehensive and granular fashion than can be achieved from relatively blunt and misleading economic models will have far reaching impacts,” said Alex Halliday, director of Columbia University’s Earth Institute. “Therefore, this venture is sorely needed and will deepen the knowledge of members of the financial sector to make informed decisions based on a planet that is changing due to global warming.”
Shareholder support for climate-related resolutions at the companies they invest in hit an all-time high of 30% in the latest proxy filing round, and fund and asset-management firms are differentiating themselves in how they respond to the environmental, social and governance demands of their investing clients, as well as how they, too, factor in the unique risks.
“This extensive [climate] curriculum will empower our investment managers to better assess these increasing climate complexities, engage more effectively with companies and ultimately build more sustainable portfolios for clients,” said Seth Bernstein, president and CEO of AllianceBernstein.
AB is not the only asset-management firm looking to improve the data and analysis around the climate impact on investing, and standardize the way that companies assess and disclose those risks.
Earlier this week, Wellington Management and the $360 billion California Public Employees’ Retirement System, or CalPERS, rolled out the physical risks of climate change (P-ROCC) framework. The framework is intended to unify and improve how companies disclose their vulnerabilities to Earth’s physical changes. That in turn will help asset owners and investment managers better evaluate the ability of the companies they invest in to adapt to or mitigate such risks from extreme heat, drought, wildfires, hurricanes, flooding and water access, among other concerns.
Beth Richtman, managing investment director of sustainable investments at CalPERS, says the pension fund’s multi-decade time horizon for its portfolio means that it is “critical to understand how our companies are planning to adapt to the physical risks of climate change… To date, we find financial disclosures have a long way to go in order to provide the type of information that we would find impactful to our investment process.”
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