Investors Can't Diversify Away from Climate Risk
With the U.S. role in the Paris Climate Agreement hanging in the balance, over 280 investors managing a collective $17 trillion in assets spoke up in support of the agreement:
"As long-term institutional investors, we believe that the mitigation of climate change is essential for the safeguarding of our investments ... We urge all nations to stand by their commitments to the agreement."
Why do investors care? As pointed out in a blog earlier this year, for investors, it all comes down to risk and return. And, where climate change is concerned, this is a risk that is omnipresent.
Simply put, investors cannot diversify away from the risks of climate change. Unlike other risks such as currency fluctuations or new regulations, the disruptive impacts of climate change on the global economic system are so pervasive they cannot be offset by simply shifting stock portfolios from one industry to another.
Joan Campderrós-i-Canas