Why investors should act in response to climate-related risks and opportunities: a survey of current evidence

The evidence shows that there are clear trends emerging and irreversible shifts under way when it comes to climate change. These changes will have highly significant impacts on the success, income and value of companies directly exposed to climate change risks (e.g. fossil fuel companies), on sectors with secondary exposure (including banking and finance, insurance, transport, and construction) and on the economy as a whole.

Climate change will affect both the value of assets and the capital return on assets over the long-term, which is why understanding its impacts is relevant to the fiduciary duty owed to savers and fund beneficiaries.

This report provides a summary of currently available evidence and analysis in response to the commonly posed questions below:

1. What risks does climate change pose to the value of and income from financial assets and portfolios?
2. What are the financial (transition) risks for high-carbon and fossil fuel assets, including the risk of asset stranding?
3. What are the risks for investments in sectors with secondary exposure?
4. What evidence is there that climate risk is not adequately priced into the market?
5. What investment opportunities are raised by the climate change transition?