In case the lives and well being of the next 10,000 generations of humans, and all the other species on the planet, as well as the intricate web of life that supports them all, does not move you, consider this.
Advisers might want to begin talking to their clients about the investment risk of climate change before the international conference on climate in Paris in December starts generating headlines.
Large institutional investors overwhelmingly incorporate climate change risk assessments into their investment analysis and stock selection process. So it may only be a matter of time before retail investors start to wonder if their portfolios are structured to take advantage of the investments that stand to gain from climate changes and protected from those that are likely to be hurt?
Some financial advisers incorporate investment filters that screen out companies with the highest carbon footprints, and an increasing number of mutual funds are focused on fossil-fuel-free investments. Even exchange-traded funds are looking to help investors find the upside of climate change risk by investing in clean energy technologies.
“We are at an inflection point. Going forward, high-carbon fuel sources are a bad investment, like getting behind the horse and buggy in the 1920s,” said Marlena Sonn, founder of Treebeard Financial Planning. “The switch to solar and wind will happen faster and more dramatically than oil and gas companies are expecting.”
.The article goes on with statements indicating that the author still does not get the seriousness of the issue:
A new report by international consulting firm Mercer, “Investing in the Time of Climate Change,” analyzes the impact climate change could have on investments over the next 35 years, and it considers four different warming scenarios.
It concludes that a two to four-degree Celsius change will cause the coal sector to fall between 18% and 74% through 2050, “with effects more pronounced over the coming decade,” when 26% to 138% of average annual returns would be eroded, the report authors said.
A 2 to 4 degree C change in temperature would, of course, do a lot more than cause the coal sector to fall. More education required.
– There is increasing evidence that climate change risks constitute a significant portfolio risk for investors—contributing as much as 10% to overall portfolio risk– However, in the absence of clear, stable policies—such as a meaningful price on carbon—investors will hesitate to shift their strategies.– Increasing investments in low-carbon and climate-resilient assets is in the mutual interest of governments and investors, but requires bold leadership and a long-term view.– A growing number of investors are taking steps to integrate climate risk into their investment strategy, for example by tracking carbon exposure. They are also shifting investment strategies to prefer companies with relative lower emissions. In this way, investors are building climate-resilient, greener portfolios.
10% Portfolio risk? Are they joking? In our dreams, perhaps.