brief INSIGHT by Aberdeen Standard Investments
| The effects of climate change are impossible to ignore. Reports of record temperatures hit the news on a regular basis. Extreme weather events – such as storms, wildfires and floods – occur with ever greater frequency. The melting of ice sheets is clearly visible.
As the world’s population grows, demand for energy, greenhouse gas emissions and temperatures continue to rise. The scale of the climate change challenge is immense, the urgency to act unprecedented.
Investors – asset owners and fund managers – need to understand how these changes will affect the value of their investments. Assessing the risks and opportunities of climate change should form a core component of investment research, as well as environmental, social and governance (ESG) integration.
This involves gaining an in-depth understanding of how each company is exposed to material issues related to climate change, and what these companies plan to do to tackle these challenges.
That said, there are opportunities as well. The transition to a low-carbon economy will require large amounts of private capital to construct renewable energy infrastructure, low-carbon transport and improve energy efficiency. Investor who understand these opportunities could therefore proper, while still contributing to a more sustainable world.
Eva Cairns, Senior ESG Investment Analyst, explores how to unlock these opportunities in her paper Investing in a Changing Climate. You can find out more here.
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