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| | Hot hot hot This Monday was the hottest ever day recorded on earth with the daily global average temperature reaching 17.15 degrees Celsius.
The impact of climate change is being felt across the globe, and as we report this week, could see more than 40 per cent wiped from the stock markets.
Research from the EDHEC-Risk Climate Institution introduces a new means of assessing climate risk on companies, and be default their investors, and finds that the impacts are widely underestimated.
According to Professor Riccardo Rebonato, Scientific Director of EDHEC-Risk Climate Impact Institute and leader of the research team, current valuations are based either on the belief that climate change will be mitigated successfully in the near future, or that even if we fail to meet abatement targets, the impact will be minimal.
"Since neither assumption should be considered a very likely scenario, we have argued that there is ample potential for equity revaluation," Rebonato says.
It is time, the Institute says, for "aggressive climate policies if global equity values are to be preserved".
Among those investors heeding the warnings are the UK’s pension funds and insurers which this week announced a funding model to help channel GBP100 billion in private capital to green infrastructure.
The ABI’s Investment Delivery Forum says the model would produce "many multiples of private investment for every pound of public investment", and will target a national EV-charging network alongside commitments to nuclear energy and offshore wind farms.
The ABI says it will likely work with the new National Wealth Fund to secure public investment which would be used to mitigate the initial risk in new infrastructure that private investors are unable to take, due to regulatory rules.
Looking at the EV-charging network, the ABI says less than GBP1 billion of public investment spread over 15 years would support up to GBP20 billion of private investment, driving economic growth.
Rhian Mari-Thomas, Chief Executive Officer of the Green Finance Institute which worked with the ABI to formulate the model, says partnership is "essential if we are going to meet our net zero targets in the UK", noting this extends not just to public and private capital investment, "but also a partnership of ideas".
It is encouraging to see concerted efforts from government and the financial sector to drive the green transition in a way that promises both the chance of mitigating climate risk but also promoting growth and bolstering portfolios.
However, public private partnerships have not always been harmonious - as we saw with the Private Finance Initiative – and any new arrangements will need to be carefully managed if they are to succeed
Having been so very active, Institutional Asset Manager is going to down tools and have two weeks off from newsletters over the first two weeks of August. The 2nd and the 9th of August will see no newsletters from us, but we will return with a bumper harvest on the 16th. Meanwhile, the site will be kept updated with news and features over the two weeks.
To everyone who is taking some time off over this summer, we wish you happy holidays.
Gill Wadsworth, Editor, Institutional Asset Manager
For live updates please follow us on Twitter and LinkedIn.
| | | | | | | | | | | | | | | | | | | | | | | | | Fixed income’s digital revolution has arrived, time to adapt Paul Benson, head of Systematic Fixed Income, Insight Investment, writes that systematic fixed income approaches are finally hitting the mainstream. If you are starting to incorporate them, make sure your managers have a long and proven pedigree, he says. |
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