Climate change will continue to be one of the most economically impactful events as it affects us all. It requires immediate and ambitious action to prevent the worst effects on people and biodiversity and it signals a message that nations need to build a more resilient and sustainable global financial system.
Asset owners need to educate themselves on climate change and understand the implications of a warmer world on investments. They need to grasp the risks and the opportunities that may arise. And for that they need better data and better reporting standards. They should therefore engage with corporates, issuers and policy makers to help inform best practices and standards for climate change-related disclosures.
Developing a comprehensive understanding of these impacts is important as the economic costs of climate change grow and global action accelerates.
The cost of adaption measures to help mitigate climate change in developing countries could rise to between $280-500bn (€230-415bn) annually by 2050, a figure that is four to five times greater than previous estimates, according to a new United Nations Environment Programme (UNEP) report.
Integrating climate vulnerability into an investor’s risk assessment process can identify key opportunities to mobilise the resources necessary to make the economy more resilient.
Extensive work on disclosure is already under way within the investment management industry both to implement regulatory changes in a robust and meaningful way, as well as proactive work to improve the consistency and transparency of sustainability-related disclosures.
It is crucial that these disclosures continue to be improved in a way that is clear and useful to asset owners to assist them in their investment choices. For investors seeking to manage their assets in perpetuity, a long-term perspective is critical.
Venilia Amorim, editor, IPE.com