Earlier this year—after the damage caused by weather events linked to climate change in 2018 cost an estimated $160 billion worldwide—the CDP (formerly the Carbon Disclosure Project) reported that the shift to climate-friendly products and services represents a $2.1 trillion business opportunity. The level of investment in sustainable and green assets reached $30.7 trillion in 2018, a 34% increase over 2016, according to the Global Sustainable Investment Alliance, representing one-third of the $92 trillion of assets under management worldwide. These trillion-dollar opportunities, however, are tempered by the risks posed by climate change. The CDP estimates that the risk to business—based on disclosures from 215 of the world’s 500 largest companies—is $1 trillion, mostly over the next five years. Since the 2015 Paris Agreement, a primary business risk is increasingly stringent environmental regulations, as nations, states and cities have stepped up the pace of measures introduced to reduce emissions. It is no surprise that all of this activity is filtering through to the corporate world. The United Nations Environment Programme Finance Initiative (UNEP-FI) has calculated that delaying action to tackle climate change will result in $1.2 trillion of extra costs for companies over the next 15 years. As a result, investors are increasingly aware that companies heavily exposed to carbon emissions could see their profitability take a hit, reducing returns. Investors are increasingly proactive on this issue. For example, since 2015, insurer Lloyd’s of London has seen 436 institutions and 2,040 individual investors commit to divest from fossil-fuel companies. There are now a wealth of initiatives to help investors hold companies to account, including the Principles for Responsible Investment; CDP’s disclosure programme, which calls on companies to reveal their emissions to investors; and the U.N.’s Sustainable Development Goals (SDGs), which include targets for affordable and clean energy and climate action.
Bloomberg 3rd July 2019 read more »