1. Climate is a material risk to investments
Investors have a fiduciary duty to manage material risk that can undercut financial performance.
The potential financial impacts of climate change are now widely reported. It is understood that climate change beyond 2°C would have very damaging economic impacts on all asset classes in ways that could not be hedged. A study by Cambridge University, for instance, found future climate risks could lead to economic shocks and losses of up to 45% in an equity investment portfolio value. The Economist Intelligence Unit found warming of 5°C could result in US$7 trillion in losses – more than the total market capitalization of the London Stock Exchange – while 6°C of warming could lead to a present value loss of US$13.8 trillion of financial assets, roughly 10% of the global total.