Just released in NYC: OECD global enviro health check - wake up call for investors

The OECD's new Environmental Outlook to 2050 – the equivalent of a planetary health check - is, frankly, deeply disturbing. It has special implications for institutional investors like pension funds, for whom sustainability of value creation is central to their fiduciary duty.

The report has just been launched in New York at the Bloomberg New Summit by OECD director Simon Upton. It takes an “integrated approach”. Its sub-title is “The Consequences of Inaction”. Nice.

This is not a small environmental group making assertions; this is the world's premier economic - and generally conservative - forecasting agency looking at water, health and economic growth implications of the environment outlook for the next 40 years.

It's a medical check-up with a very serious health warning arising.

If institutional investors are to successfully match their assets to liabilities going forward, they cannot afford the grim economic disruption the OECD suggests if we fail to transform our policies and behaviour. The report therefore has major implications for the fiduciary duty of their trustees. With a very clear and authoritative exposition of the long-term threats to investment portfolios, it is now their responsibility to look at how they respond that portfolio threat in acting on behalf of their members and stakeholders.

The scale of the threat is systemic; it will demand co-operative responses able to address systemic issues - this is not something a fund can address in isolation, however big they are. On the other hand, this isn't rocket science - industry groups in oil and gas, automotives and pharma have been doing this for 50 years. Investors have to step up.

Like a good doctor, the OECD outlines how we can head off the major risk of a heart attack.

Institutional investors are the planet's guardians of long-term sustainable returns. They don't have the option of sitting by and seeing the patient career into disaster; they need to get involved in making sure that heart attack headed off.

Simon Upton again: “The question now is whether we’ll get investment grade policy or junk policy? Junk policy, or no policy, will lead to a legion of stranded assets.”

“The report changes the ratio for everything! There are consequences for:

-       Interest rates

-       Investment returns

-       Discount rates

-       Credit spreads

-       Inflation

-       Catastrophe risk

-       Mortality and morbidity rates.”

But that's all!

Strong stuff.