Social and asocial learning about climate change among institutional investors: lessons for stranded assets

ABSTRACT

Institutional investment portfolios are currently, and will increasingly be, affected by the risks and opportunities resulting from climate change. This paper contributes new empirical data from 58 in-depth interviews and a global investor survey to explore how climate change is being learnt socially and asocially within the institutional investment industry. This research seeks to identify ways in which the relatively novel concept of ‘stranded assets’ can be better disseminated to investment professionals. Importantly, both social and asocial learning can affect investment decisions, with some actors usefully providing information via both channels. Better learning, language and leadership within the institutional investment system could facilitate the dissemination of climate and stranded asset discourses among investors, but an imperative to communicate effectively rather than simply communicating more is noted. This paper should interest both investment professionals keen to learn more about the issue and academic researchers seeking to engage investors on these topics.

KEYWORDS:

• Climate change
• communication
• information
• institutional investment
• learning
• responsible investment
• stranded assets

Acknowledgements

I would like to begin by expressing my gratitude to Ben Caldecott and Gordon Clark, my supervisors within the Oxford Smith School, whose guidance and support was invaluable in preparing and writing this paper. My heartfelt thanks also go out to my reviewers, friends and family who read and commented on early drafts. Thanks must also go to all those who have participated in my research, generously sharing their time and experience. Without you this would be a very different project, your perspectives and experiences added invaluable depth and insight to this research. I would also like to thank Absolute Strategy Research and the Oxford University Smith School of Enterprise and the Environment for their kind sharing of contacts, which made this research possible. My particular thanks must go to Luke MacRedmond, for his readiness to share contacts and desk-space in Australia.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Western Europe and Middle East used in calculation due to the geographic scope of interviewed organizations’ AUM despite their investment office location in the UK.

2 http://divestinvest.org.

3 Rice (2010) suggests adopting a business-like or ‘inside’ approach, using ‘gatekeepers’ to gain access to initial interviewees.

4 For example, this announcement was widely covered in the Economist, the BBC, the Guardian, CNN, the New York Times and the Wall Street Journal in the week beginning 3rd August 2015. The President said ‘I am convinced that no challenge poses a greater threat to our future, to future generations, than a changing climate’, (The Economist 2015).

5 https://www.cambridgenetwork.co.uk/learning/peer-learning/.

6 http://www.accountingforsustainability.org/cfos/network-of-chief-financial-officers.

7 For example, law firms Minter Ellison and Client Earth are producing novel research and litigation emphasizing investors’ institutional and individual liability to climate risks, and the Bank of England has been pioneering in its capacity as a regulator calling for greater accounting for stranded asset and climate exposure in investment portfolios. Both types of organization provide written research as well as attending client meetings and running workshops.

Additional information

Funding

The fieldwork required for the writing of this paper would not have been possible without the generous provision of scholarships and financial assistance from Jesus College, Oxford and the Oxford University Department of Geography and the Environment.