Stockholm (NordSIP) – According to a comprehensive investors assessment of the potential impact of climate change on investor portfolios convened by the UNEP FI, the price of climate change inaction could be as high US$ 1.2 trillion. According to the report, investors could face the further loss of AUM if governments continue to delay climate change reforms, compared to a scenario where climate change mitigation is enacted smoothly and steadily with immediate effect.
“Climate change is already impacting communities and economies around the world and these impacts will continue to intensify. Extreme weather events, including floods, tropical cyclones, and extreme hot and cold days are already physically impacting business operations,” according to the press release. “At the same time, policy and technology shifts ensuring that we make the transition to a low-carbon economy mean that emission-intensive companies will become less competitive. These changes pose potentially unprecedented risks—and opportunities—to institutional investors and other financial institutions who are exposed to these businesses.”
13.16% of overall corporate portfolio value, worth US$ 10.7 trillion, is exposed to significant “transition risk”. The sectoral distribution of this risk varies quite a bit. Under a 1.5°C scenario, the utility sector is most strongly exposed to policy risk, however, the sector contributes less than 10% overall to the portfolio’s climate-related risks. On the other hand, Manufacturing has a much lower risk of -16.5%, but gets the highest portfolio contribution of 46.7%.
“We now know for sure that climate change will alter our living environment radically for the worse,” said Satya Tripathi, UN Assistant Secretary General and Secretary of the UN Environment Group. “If we are serious about the future of our civilization and about delivering the Paris Agreement, we will have to fully decarbonize the economy by 2050, requiring no less than a ‘green industrial revolution’. It is still possible for us to act decisively to prevent catastrophic damage to the very web of life that sustains all species on the planet, including us humans.”
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