Climate Change is a major macro factor
Investors will be on the front line of this battle, making capital allocation decisions that will directly influence the transition to a low-carbon economy.
The multiple dimensions of climate change
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How are markets pricing in climate risk?
Climate risk will increasingly be reflected in market prices, leading to a potentially dramatic repricing in a range of sectors, assets, and companies.
Investment Implications by Asset Class
Climate change is not just a risk factor in the investment framework but an opportunity for active alpha generation along the path to a greener economy.
Portfolio Implications
Investors can no longer ignore climate change. Yet few have a comprehensive plan to address it. We propose a portfolio-wide climate action plan for investors.
- The rise in global urbanization has also exacerbated the impact of rising temperatures and episodes of extreme heat. For more information on urbanization, see “The Wealth of Cities” http://www.wealthofcities.com.
- India Meteorological Department, Ministry of Earth Sciences, as of 2019.
- Ceccherini, Guido, et al., “Heat waves in Africa 1981-2015, observations and reanalysis,” European Commission, 2017.
- Kossin, James P. Olander, Timothy L., and Knapp, Kenneth R., “Trend Analysis with a New Global Record of Tropical Cyclone Intensity,” Journal of Climate, July 17, 2013.; “Global Warming and Hurricanes: An Overview of Current Research Results,” Geophysical Fluid Dynamics Laboratory at U.S. National Oceanic and Atmospheric Administration, September 23, 2020.
- Machemer, Theresa, “The 2020 Atlantic Hurricane Season Officially Has the Most Named Storms on Record,” Smithsonian Magazine, November 11, 2020.
- Bolongaro, Kait, “Farmer vs. sand: Spain’s fight against desertification,” Politico, April 3, 2019.
- Gray, Ellen, “NASA Finds Drought in Eastern Mediterranean Worst of Past 900 Years,” U.S. National Aeronautics and Space Administration, March 1, 2016.