For COVID-19 and Climate Change, Delay is the Enemy

By Sarah Wilson and Allison Spector    //    Volume 28,  Number 6   //    November/December 2020
AGB Trusteeship Magazine: November/December 2020, with cover article Enrollment Effects - The Impact of the Pandemic"

Back to school looks a little different this year for the 19.7 million students1 attending colleges and universities in the United States. Blended and remote learning have taken hold across the country as students and faculty adapt to a post-COVID-19 learning environment.

Colleges and universities have made great strides since the spring to mitigate the effects of COVID-19 both on the return to school and on their endowments. While the hope of a vaccine means that COVID-19 may not be around forever, there is another global crisis that is already lurking and may prove more destructive: climate change.

Like COVID-19, climate change will have a global impact, especially on vulnerable low-income populations. Climate change could result in greater loss of life than COVID-19 by 2060, increasing to five times higher by 2100.2 And it affects not just human life, but all natural ecosystems on which we depend.

Climate change is also a financial issue. For example, climate change could cause financial shocks from extreme weather events, major policy changes, or even swift adoption of low carbon technology. Research even suggests that U.S. GDP could shrink 1.2 percent annually for every additional degree of warming.3 Changes to the climate are already taking place, but are less personal and more diffuse than the impacts of a global pandemic. While this may diminish  our sense of urgency, the window of opportunity to avoid the worst impacts of climate change is only approximately 10 years.4

With regard to both the pandemic and climate change, delay is the enemy. While colleges and universities are rightfully worried about the current global pandemic, preparing for climate risk now can set institutions up for success in the future. Like COVID-19, climate change will have lasting financial impacts on the economy and on investment portfolios— including university endowments.

Two Types of Climate Risk

It can be useful to split climate risk into two underlying risks: transition risk and physical risk. Transition risk refers to the impact of the shift to a low carbon economy. Transition risk primarily affects investments in a university endowment, which could experience sudden repricing or stranded assets, depending on the timing and nature of the transition. To illustrate this, let’s walk through an example, which breaks transition risk down into four component risks.

Let’s say that an endowment holds investments in European companies, and the European Union increases its price on carbon. That’s policy risk, especially for investments in oil, gas, and coal companies, who will then have to pay more for the carbon they take  out of the ground. As a result, energy prices would likely rise as those costs get passed  on, which affects other industries and creates market risk. Now that carbon is more expensive, low carbon technologies look even more attractive. Perhaps we see a technology breakthrough that changes the game, like much cheaper electric vehicle batteries. That creates technology risk, especially for investments in auto companies in this example. Reputational risk is broader, but imagine a company continues to say climate change isn’t real contrary to general consensus. Their brand reputation could suffer and they could lose customers, affecting their value.

The low carbon transition can also create investment opportunities, for example in areas like renewable energy, green infrastructure, sustainable agriculture, and green buildings. Identifying and investing in these opportunities can help mitigate transition risk and generate attractive returns, depending on the market environment and the fundamentals of the opportunity.

Meanwhile, the physical risk of climate change is more straightforward. This refers to the direct physical impacts of climate change, which can be acute (like a hurricane), or chronic (like slowly rising sea levels). Financial impacts can follow from these risks, including disruption to company supply chains, high costs for communities to adapt to these changing conditions, and loss of access to insurance if the insurance companies can no longer afford to cover certain areas. Investment performance can suffer, depending on the resiliency (or lack thereof ) of the portfolio to physical shocks. Of course, these physical risks could also impact university operations directly, and any climate risk management strategy should encompass both operational and investment impacts to the university.

How to Manage These Risks

All types of organizations, including universities, are now coming to grips with how best to manage both the transition and physical risks of climate change. In 2017, the Financial Stability Board published a global set of recommendations to help organizations with this task, while also seeking to standardize the information that companies report to investors on this topic. These recommendations, known as the Task Force on Climate-Related Financial Disclosure (TCFD), are now being used by investors like TIAA to strengthen climate risk management practices across investment portfolios. TIAA formally endorsed the TCFD recommendations and is now striving to implement its best practices across four pillars: governance, strategy, risk management and metrics, and targets.

Getting Started with the TCFD

In partnership with our in-house asset manager Nuveen, we have taken a number of concrete steps to align with the TCFD recommendations. We share this in hopes that university asset owners can draw inspiration for their own climate risk management journey, while also recognizing that our own strategy will evolve over time.

  • TIAA and Nuveen launched a Climate Risk Task Force in 2019 to better manage climate risk across investments and operations.
  • The task force assessed climate risk best practices by peers, identifying gaps vs. best practice, and made recommendations to senior leadership on how to close those gaps.
  • Through our annual UN Principles for Responsible Investment assessment, we publicly disclosed our progress against the TCFD recommendations.
  • We are beginning to use “next generation” climate risk data to model potential impacts on investment value under different climate scenarios. We also make carbon emissions data from thousands of companies available to all our investment teams to reference during investment research and portfolio management.
  • We strongly emphasize engagement with portfolio companies on how they are managing climate risk. For instance, we vote for more climate change shareholder proposals than any other U.S. investor.5
  • Nuveen Real Estate sets ambitious targets to reduce emissions in our real estate investments, aiming for net carbon zero by 2050.

We seek opportunities to invest in green and low carbon projects through public markets, and own over $4 billion in green bonds across TIAA and Nuveen.6

Additionally, endowment focused associations, such as the Intentional Endowment Network among others, can serve as helpful resources to colleges and universities who are on their climate-risk management journey.


There is an opportunity for institutions to leave a positive legacy of climate risk leadership. While the risks of climate change are upon us, the tools to manage these risks are available to investors and institutions alike—the next step on the journey is to implement them.

Allison Spector is a director of responsible investing at Nuveen, and is responsible for setting the sustainability strategy and driving implementation of best practices in environmental, social and governance (ESG), climate risk and impact investing within real assets and private markets, which include investments across farmland, timberland, agribusiness, energy and infrastructure, private equity, and private debt. She has B.A. in International Studies from Emory University and an M.Sc. in Sustainable Development from the School of Oriental and Asian Studies at the University of London, where she focused on sustainable agriculture.

Sarah Wilson is a senior director of responsible investing at Nuveen, and is responsible for the integration of environmental, social and governance (ESG) factors in the investment process within fixed income. She also focuses on firm-wide climate change initiatives, as well  as  measuring the social and environmental impact of the firm’s public and private investments. She has a MBA and master’s degree in environmental management from Yale University and a BA in economics from the University of Texas at Austin. She serves on the advisory board of the Yale Initiative for Sustainable Finance.


  1. National Center for Education Statistics, Fall 2020.
  2. Gates Notes, COVID-19 is awful. Climate change could be worse., 2020.
  3. Hsiang, et. Al. Estimating economic damage from climate change in the United States. Science, 30 June 2017.
  4. IPCC, Global Warming of 1.5C: Summary for Policymakers, 2018.
  5. ShareAction. Voting Matters Report, 2020.
  6. As of 30 June 2020.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on factors such as market conditions or legal and regulatory developments. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.

Nuveen provides investment advisory solutions through its investment specialists.

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