Weathering the storm: what climate change means for investors’ portfolios
This past November, more than 11,000 scientists from 153 countries signed a statement in which they
The profitability of a portfolio is related to the value of its underlying assets, which can be directly affected by climate change. The impact is likely to be a negative one, stemming from physical risks that arise from an increase in extreme weather events, such as the devastating forest fires that Australia has been suffering from since September 2019. The bushfires have claimed human and animal lives, and caused immense damage to infrastructure and biodiversity. For businesses, climate change can involve a loss of assets, a reduction in sales due to the impact on their supply and distribution chain, and higher insurance costs. These factors have a notable influence on the financial health of the underlying assets contained within portfolios. For example, Californian gas and electric company PG&E filed for bankruptcy in January 2019 following the deadly fires that hit the state the year before. Experts point to this as
The profitability of a portfolio is related to the value of its underlying assets, which can be affected by climate change Time to act It is expected that the implementation of green policies will accelerate between 2023 and 2025. Portfolios should prepare for this change. New regulations could bring about a number of transition risks, including increased costs for corporations in terms of carbon taxation, which can substantially change the risk profile of a bond issuer or the value of a share. Loss of value in assets might also occur; lucrative oil reserves, for example, could be left unexploited as companies strive to meet the two degrees Celsius objective. Demand-side risk should also be considered as more consumers seek products and services from companies with a low environmental impact. Reputational risk might also occur, which may affect a business’ ability to attract talent or implement structural changes in its customer base. Fortunately, climate change does not only present risks for portfolios; opportunities are also created. In 2018, the
It is crucial that investors mitigate physical and transition risks in portfolios and are able to capture any opportunities that emerge. At Prima AFP, we recognise the importance of knowing if the companies in which we invest are clear about these risks and if they are prepared to manage them properly. Lasting change It is more vital than ever that companies consider environmental, social and corporate governance (ESG) factors in their management and that they seek to generate competitive advantages as part of an integrated sustainability strategy. According to
The asset management sector is not immune to this shift. More institutional investors are integrating sustainability issues into their investment processes. The number of signatories of the Principles for Responsible Investment has now reached 2,300, with a collective wealth of a little over $80trn in assets under management. The 2018 sustainable investment review from the
The definition of sustainable investing varies between organisations, but the GSIA’s interpretation is generally accepted as the global standard. It consists of seven criteria that determine whether an investment can be termed sustainable. These include negative or exclusionary screening (which excludes certain sectors, companies or practices from a fund due to a failure to meet ESG criteria) and positive shareholder action, where investors influence corporate behaviour in an environmental manner. The reasons behind the growing interest in sustainability are many. According to a
A higher purpose
The need to transition to a low-carbon economy is widely accepted today, and several corporate agreements have been made with the objective of meeting the targets of the Paris Agreement – namely, to stop the global average temperature from rising two degrees Celsius above pre-industrial levels. In its October 2019
Today, it is increasingly evident that sustainability will be on the agenda of corporations, investors and regulators for the foreseeable future. In a survey conducted by
A number of studies have examined the factors influencing a company’s approach to sustainability issues. A meta-analysis by Oxford University and Arabesque Partners found a correlation between sustainable business practices and economic performance. Across 200 sources, 88 percent of those with robust sustainability practices showed better operational performance, leading to higher revenues. In addition, 80 percent of sources showed that sustainability practices have a positive impact on financial performance.
The Process of Money Creation by Banks
Money creation is a complex process that involves various actors and institutions. Banks, in particular, play a crucial role in this process, as they are the ones responsible for creating most of the money in circulation. In this article, we will explore the process of money creation by banks and pr
If the bank collapses and we get our money back
The recent collapse of Silicon Valley Bank and Signature Bank has raised concerns about the safety of bank deposits and the role of the Federal Deposit Insurance Corporation (FDIC) in protecting them. The FDIC is a government agency that insures deposits in most U.S. banks and thrifts up to $250,000
Top 10 stocks with higher growth in the first half of 2023
In 2023, a new year unfolds, and the initial months have witnessed robust performance across the global stock market. Let's delve into the standout stocks that have exhibited notable strength in the first half of the year.1. Palo Alto Networks (PANW): This company is a cybersecurity firm that pr
Embracing Disruption: A Catalyst for Positive Change
In the world of business and technology, the term ‘disruption’ often carries negative connotations. It is associated with uncertainty, upheaval, and the displacement of established systems or practices. However, viewing disruption solely as a destructive force overlooks its potential to a