Climate change will have a devastating impact on human rights and institutional investors must consider these impacts when addressing climate change risk in their portfolios, according to a report.
That is the bottom-line assessment the ‘Human rights and climate change: a guide for institutional investors’ report from KPMG Australia and the Responsible Investment Association Australasia (RIAA).
The research indicated institutional investors were still prioritising environmental impacts over harm to people when addressing climate change risk in their portfolios, despite increasing attention being paid to environmental, social and governance (ESG) risks.
These ESG risks were often siloed, which meant that climate-related human rights impacts were inadequately addressed.
The research pointed out that this gap was a risk to institutional investor trustees that must be addressed as an urgent matter of prudent risk management.
Richard Boele, KPMG Australia chief purpose officer, said COP26 reinforced this was a critical moment for action on ESG matters.
“Technological and regulatory shifts are urgently required to achieve decarbonisation and the transition towards a sustainable global economy,” Boele said.
“For the transition to be made in a way that minimises harm to people, human rights must be at the centre of the response”.
Simon O’Connor, RIAA chief executive, said: “Global trends in regulation, litigation and social expectation represent significant risk for investors who fail to engage with climate-related human rights impacts in their portfolios. For institutional investors, risk to people directly translates to risk to business”.
Boele said institutional investors who controlled trillions of dollars were uniquely placed to effect meaningful change by mitigating and addressing the risks and impacts associated with climate change.
“Investors can exercise their collective influence and significant leverage to pursue sustainable and socially responsible outcomes across the global economy,” Boele said.
“As the business community and governments move towards net zero there is an unmistakable intersection between planet and people.
“Investors need to be alive to the risks and embrace the opportunities to lead. Placing human rights impacts at the centre of your analysis of climate change will give depth to your responsiveness and help us transition justly.”