As scientists contemplate the impact of climate change on the environment, a group of global investor and research groups are exploring the effects it could have on investors.

Global consulting firm Mercer is working with 14 institutional asset owners and investors from around the world, as well as the Carbon Trust and IFC, a member of the World Bank Group, to undertake a study exploring the potential impact of climate change on asset allocation.

Such Canadian groups as the British Columbia Investment Management Corporation and the Ontario Municipal Employees Retirement System will contribute to the study.

The study will identify potential new investment opportunities and possible future risks related to climate change. It will consider a variety of climate change scenarios and map the potential risks and opportunities of these outcomes for returns on asset classes in different regions over the periods until 2030 and 2050. The research will explore volatility and correlations among asset classes, regions, and sectors under each scenario and consider each scenario’s impact on strategic asset allocation.

The study will culminate in a publicly available report in the fourth quarter of 2010, which is expected to help investors determine opportunities that will thrive in a low carbon economy.

“This focus on asset classes, combined with previous work on sector impacts, should enable investors to reward opportunities that will thrive in a low carbon economy and help avoid fuelling further high carbon growth,” explained Bruce Duguid, head of investor engagement at the Carbon Trust, a U.K.-based not for profit company that supports business and the public sector in cutting carbon emissions and saving energy.

The study will also encourage financial intermediaries, such as investment managers, consultants and research firms, to develop tools, products and services that facilitate appropriate responses to climate risk scenarios. It’s important that investors prepare for the challenges associated with climate change, according to Doug Pearce, CEO/CIO of the B.C. Investment Management Corporation.

“Although we acknowledge that global warming will have wide-ranging impacts on economies and financial markets, long-term investors like bcIMC are uncertain what this will mean for our global investment strategy and how we can best prepare for this challenge, both from a risk and a return perspective,” said Pearce. “Our goal with this research project is to develop a better understanding of how to manage these uncertainties.”

Norway’s finance minister, Sigbjorn Johnsen, said the country’s government takes climate change risks into consideration in the management of the Government Pension Fund.

“The climate scenario study is an important element in our effort to gain a deeper understanding of the robustness and sustainability of our long term investment strategy,” he said.

IE