How long can big investors ignore climate risk?

Hello from London, I’m the FT climate editor, stepping in this week for Simon Mundy during his sabbatical.

It has been an intense summer: three heatwaves and another on the way; wildfires in France and Spain, not to mention Canada, and even parts of England and Norway — and it is not yet August. In the space of a few days, I have written both about the rapid drought in Europe and the phenomenon of “fire storms”.

The economic damage of the fires will take a few days to accurately estimate, experts say, though Swiss Re’s head of catastrophe perils Balz Grollimund told the FT’s insurance reporter Lee Harris that he would put a conservative early figure of “at least hundreds of millions of euros” on the losses in France.

The bigger question is how long can major investors and pension funds ignore the financial risks of climate change?

‘Climate risk is investment risk’

The French asset manager Amundi is due to report its latest quarterly results tomorrow that may show the benefits of a focus on sustainability — in Europe at least.

When it last reported fund inflows for the first and second quarters, it revealed almost €43bn in net new assets — or more than three times for the same period the year before.

One of Amundi’s latest wins, albeit modest, is a mandate from the UK endowment Nesta Trust. It today announced the transfer of assets from the American asset manager Northern Trust “to ensure investments support climate action”.

It’s not the magnitude of the Amundi win last year when the People’s Pension Fund, one of the largest in the UK, pulled £28bn from State Street, after the US asset manager joined the retreat from ESG. The £20bn developed-market equity mandate went to Amundi, and £8bn of fixed income assets to Invesco.

But it signals an ongoing direction of travel among some long-term asset managers and pension funds. It also follows the Dutch pension funds PFZW and PME and Denmark’s AkademikerPension among those to have pulled funds from US managers for similar reasons.

The Nesta Trust manages and governs the funds behind the UK research and innovation foundation Nesta. It was established in 2012 with £260mn from the National Lottery and now stands at £420mn.

Nesta said it had moved more than one-quarter of those assets to Amundi in June, worth £120mn. This was a direct consequence of Northern Trust’s withdrawal at the start of 2025 from the Net Zero Asset Managers Initiative and the similar Climate Action 100+ group.

Many big name asset managers also pulled out of these industry initiatives after the election of US President Donald Trump coincided with several “red” states taking antitrust action against asset managers.

Northern Trust leaving the industry climate initiatives was “incompatible with its mission to build a sustainable future”, Nesta’s investment committee said.

The handover of Nesta’s passive global equity portfolio (passive management draws lower fees) reflected the “commitment to reducing global greenhouse gas emissions”.

Nesta Trust chief investment officer Jenny Segal said the economic risks of climate change meant it was “the duty of any asset manager to ensure their investments support climate action to protect the portfolio’s growth”.

“Asset managers that step back from climate action initiatives risk compromising their stewardship and so we took the decision that Amundi was a better home for Nesta’s global equity investments.”

“We hope that our disinvestment shows that asset owners do not have to silently accept a rollback of climate commitments, and that this shows others they can hold their fund managers to a high standard.”

Amundi has recently had a reshuffle after the departure of its head of institutional clients and ESG of nearly a decade, Jean-Jacques Barbéris, to another senior role at the asset services arm of Crédit Agricole, which is Amundi’s majority shareholder.

It also attracted scrutiny over its fossil fuel investment policies, which have shifted to exclude oil and gas companies that “significantly exceed operational carbon intensity trajectories without credible corrective action”.

It could vote against board members or downgrade ESG scores at oil and gas companies with high carbon intensity operations or falling investment in low-carbon solutions, however.

Amundi UK chief executive Eric Bramoullé said clients were still looking to ensure assets were invested in a way that reflected the sustainability commitments they had made alongside financial performance.

The independent UK membership group known as Investors for Purpose, which Nesta Trust has joined, noted that in an increasingly polarised world “balancing diverse client expectations on ESG is genuinely challenging, and not every step back from a climate commitment reflects a step back from climate risk management”.

But Charlotte O’Leary, chief executive of Investors for Purpose, summed up the core issue, while issuing a call for a wider conversation across the industry about how managers can navigate the pressure to deliver returns and also keep to the fundamentals of stewardship: “Climate risk is investment risk.”

Smart reads

Investor demand for private capital funds that explicitly seek positive environmental or social outcomes has held steady in recent years despite the political backlash, reports Alexandra Heal.

Scientists are now racing to update their understanding of how wildfires start, spread and intensify in climate feedback loops, writes science commentator Anjana Anhuja.