PORTSMOUTH, N.H., October 26, 2020 – The New York State Common Retirement Fund and Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds, are calling on companies in the S&P 500 Index to disclose the precise locations of assets whose loss or impairment would impact financial results. The call comes as the physical risks associated with a changing climate increase.
“Flooding, droughts, rising sea levels and other extreme weather events are posing increased risks not only for companies, but their investors, financial markets and the global economy,” says New York State Comptroller Thomas P. DiNapoli. “Where a company operates key facilities is a major factor in its exposure to physical risks. While companies often provide general geographical information about the locations of their assets such as states, regions or countries, it’s not specific enough. Investors need much more precise physical location data from companies to help make sound long-term financial decisions,” DiNapoli says.
In a letter, Impax and the New York State Common Retirement Fund ask the companies to disclose a street address or the latitude and longitude of their significant assets, including facilities, reserves, buildings and installations.
Investor concern about climate risks is growing as a body of scientific research increasingly shows that assets at risk as a result of climate change range into the trillions of dollars. For example, S&P Global recently estimated that 60% of S&P 500 Index companies’ own physical assets that face high risk of climate-related physical losses. This represents a total market capitalization of $18 trillion dollars in the United States alone.
“Investors need to understand the nature of companies’ physical risks so they can take steps to manage them, or adapt to them, and to price the risks properly in investment portfolios,” says Julie Gorte, Senior Vice President for Sustainable Investing at Impax. “A company with a major manufacturing facility in a flat coastal location is far more vulnerable to both coastal cyclones and sea level rise than the same facility sited hundreds of feet above sea level,” Gorte says.
What’s more, the letter states, “Without precise information, investors are likely to assign physical risk estimates based on the wider geographies, and this is almost certain to result in an overestimate of the physical risk the company actually faces, because in the face of uncertainty and the growing risks of climate change, investors must assume that risks apply.”
In July, Impax Asset Management LLC filed a petition for rulemaking with the U.S. Securities and Exchange Commission requesting the agency require companies to disclose location data.
1] See, for example, Federal Reserve Bank of Richmond, “Temperature and Growth: A Panel Analysis of the United States,” WP 18-09, 2018, https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2018/pdf/wp18-09.pdf?pwm=7047; OECD, “The Economic Consequences of Climate Change,” November 3, 2015, https://www.richmondfed.org/-/media/richmondfedorg/publications/research/working_papers/2018/pdf/wp18-09.pdf?pwm=7047, and Simon Dietz, Alex Bowen, Charlie Dixon and Philip Gradwell, “Climate Value at Risk’ of Global Financial Assets,” Nature Climate Change, April 4, 2016, https://www.nature.com/articles/nclimate2972.
About Impax Asset Management
Impax Asset Management LLC, formerly Pax World Management LLC, is a pioneer in the field of sustainable investing. Impax offers a diverse lineup of strategies focused on the risks and opportunities arising from the transition to a more sustainable global economy. Each strategy integrates environmental, social and governance (ESG) research into the investment process to better manage risk and deliver competitive long-term investment performance. Since 1971, Impax has made it possible for investors to pursue financial returns while having a positive social and environmental impact.
About New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund has consistently been ranked as one of the best managed and best funded plans in the nation. The Fund’s fiscal year ends March 31.
© 2020 Impax Asset Management LLC. All rights reserved.
Pax World Funds are distributed by ALPS Distributors, Inc. ALPS Distributors is not affiliated with Impax Asset Management LLC or the New York State Common Retirement Fund.
RISKS: Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. Emerging markets and International investments involve risk of capital loss from unfavorable fluctuations in currency values, differences in generally accepted accounting principles, economic or political instability in other nations or increased volatility and lower trading volume. Investments in Asia/Pacific increase the impact of events and developments associated with the region can adversely affect performance.