Crucial for investors to price in climate risks

THE science is unmistakable: climate change is happening and will bring new risks. Awareness is growing in the financial sector on the importance of identifying and preparing for climate risks. These include not just more extreme weather and natural disasters, but also regulatory and social pressures. Yet, not all investors are prioritising climate risks and this gap needs to be bridged.

A recent report by Australian activist group Market Forces showed mixed views towards climate risks among investment professionals at major global financial institutions. Of the 150 investors surveyed, 84 per cent said that they were moderately to extremely concerned about climate change.

But, a lower proportion of 57 per cent said that climate risks had a high or very high level of influence on their company’s investment decisions. The climate change impacts of the investee’s activities – such as coal mining or oil production – ranked even lower as a concern, with only 51 per cent citing it as a highly influential factor.