A review of 12 dominant mutual funds by think tank Climate Risk Horizons revealed that none performed climate scenario analysis or stress testing. While these firms maintain standard ESG frameworks, all failed to publish the emissions financed by their investment portfolios. This lack of transparency contrasts sharply with the broader Asian market, where roughly two-thirds of peers disclose climate scenario data. The shortfall is particularly urgent given McKinsey & Co.'s projection that heat and humidity could put $250 billion in Indian annual output at risk by 2030.
Key points
Domestic fund managers fail to fulfill basic fiduciary obligations by concealing financia…: Domestic fund managers fail to fulfill basic fiduciary obligations by concealing financially material climate threats from their investors.
Existing ESG oversight frameworks remain largely ineffective because firms continue to om…: Existing ESG oversight frameworks remain largely ineffective because firms continue to omit the carbon emissions financed through their investments.
Implementing formal regulations for climate portfolio testing and mandatory disclosures i…: Implementing formal regulations for climate portfolio testing and mandatory disclosures is vital to mitigate systemic economic damage across Indian markets.
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The bulk of India’s $900-billion asset management sector does not disclose how portfolios would withstand climate shocks, leaving investors in the dark, a new study shows.
Twelve mutual funds—accounting for more than 80% of the industry’s assets— scored zero on climate scenario analysis and stress testing, said the report by think tank Climate Risk Horizons. None revealed how a rapid transition to clean energy, delayed action, worsening physical hazards or stranded projects would impact valuations and returns.
Indian asset managers are outliers globally on climate stress testing. Roughly two-thirds of their Asian peers disclose at least some level of scenario analysis, and the practice is even more widespread among the world’s biggest firms. The gap is consequential for India, where rising heat and humidity alone could put as much as $250 billion of annual output at risk by 2030, according to McKinsey & Co.
Investors need to “understand where the risk sits, how it affects investment value and what fund managers are doing about it”, said Sneha Yadav, a sustainable finance analyst at Climate Risk Horizons and lead author of…
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