Institutional investor attitudes to addressing climate change risks in portfolios

The report finds that while South African institutional investors increasingly recognize the relevance of ESG factors, integration remains slow and inconsistent. Many investors rely on narrow proxies for climate risk, such as carbon taxes, while largely ignoring physical risks and water scarcity. The study highlights a systemic lack of demand from asset owners and a prevalence of short-termism in performance evaluation, which hinders the transition to a low-carbon economy. Despite these barriers, a majority of respondents acknowledge that portfolios are heavily exposed to climate-vulnerable sectors, particularly through state-owned enterprises like Eskom and Transnet, leading to the conclusion that many assets may be mispriced.

• Over half of the institutional investors surveyed agree that climate change and freshwater risks are not being priced into investment decisions, which leads to mispriced assets and potential systemic risk.
• Institutional investors in South Africa tend to use a narrow definition of climate risk, primarily viewing it as the cost of carbon taxation or mitigation rather than considering adaptation costs or externalities.
• Despite conceptual agreement on the threats posed by water scarcity to business continuity, there are no proactive processes in place among the surveyed investors to track these impacts or map risks at a portfolio level.
• There is a perceived systemic lack of demand from asset owners for responsible investment, which discourages investment managers from committing resources to high-quality ESG integration.
• Short-termism in investment contracts and mandates incentivizes companies to focus on immediate returns rather than long-term sustainability, which is problematic as climate and water effects are typically only visible through long-term trend analyses.
• A majority of surveyed investors recognize a link between ESG management and financial performance, with 73% stating they would pay a premium of up to 10% for better environmental performance as a proxy for good management.
• The lack of consistent, comparable, and mandated ESG data from companies remains a primary barrier to the integration of these factors into investment research and decision-making.
• Regulatory changes, specifically the amendment to Regulation 28 of the Pension Funds Act effective January 2012, have pushed ESG risks and opportunities into the mainstream by requiring retirement funds to indicate how they deal with ESG criteria.

APA

Sinclair, G., & Lees, Z. (2013). Institutional investor attitudes to addressing climate change risks in portfolios. WWF South Africa. http://awsassets.wwf.org.za/downloads/3__institutional_investor_attitudes_to_addressing_climate_change_risk_in_portfolios.pdf

Chicago

Sinclair, Graham, and Zoe Lees. Institutional investor attitudes to addressing climate change risks in portfolios. WWF South Africa, 2013. http://awsassets.wwf.org.za/downloads/3__institutional_investor_attitudes_to_addressing_climate_change_risk_in_portfolios.pdf.

Wikipedia

{{cite report |last1=Sinclair |first1=Graham |last2=Lees |first2=Zoe |title=Institutional investor attitudes to addressing climate change risks in portfolios |publisher=WWF South Africa |date=May 2013 |url=http://awsassets.wwf.org.za/downloads/3__institutional_investor_attitudes_to_addressing_climate_change_risk_in_portfolios.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sinclair2013institutional, author = {Sinclair, Graham and Lees, Zoe}, title = {{Institutional investor attitudes to addressing climate change risks in portfolios}}, institution = {WWF South Africa}, year = {2013}, month = may, url = {http://awsassets.wwf.org.za/downloads/3__institutional_investor_attitudes_to_addressing_climate_change_risk_in_portfolios.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }