Investors cannot invest intelligently while ignoring systemic risks. Everyone who wishes to generate a return on their investments must factor climate change into their equations. There are several reasons why climate change constitutes an unalterable driving force impacting the value of investments.
Voters increasingly support efforts to mitigate climate change, this means that politicians will be forced to respond. A stable and predictable policy on the environment is preferable to the sudden change that will be forced upon us if we wait until the last minute to act.
We are already seeing action in the US including the Federal Clean Air Act which has set standards for greenhouse gas emissions and the new CAFE mileage standards. There are also a number of initiatives at the regional, state, and city level. US multinationals are also subject to increasingly rigorous environmental regulations in other jurisdictions.
Climate change is both a risk and an opportunities for a wide range of asset classes from equities to real estate and sectors from agriculture to insurance.
Assessing risks associated with climate change should be a routine part of an investors assessment. Objectively, anthropogenic climate change is virtually settled science and a consensus view is emerging that climate change mitigation will impose moderate, but manageable costs on the global economy.
Whether or not you subscribe to a world view based on science or you have your head fully immersed in the sand, no investor can afford to ignore the implications of climate change.
© 2013, Richard Matthews. All rights reserved.