It’s not a good week for climate change naysayers. According to a report released this week, climate change will have significant structural impacts on the transportation, construction, and manufacturing industries over the next 20 years and could account for costs over $8 trillion by the year 2030. This comes quick on the heels of news that, as Fast Company reported yesterday, entire portions of coastal towns across the United States will be submerged in the coming decades.
The latest report, carried out by the consultancy group Mercer, along with the World Bank’s International Finance Corporation, urges asset managers to take a long-term view on the impact of climate change on foundations, pension funds, and endowments, taking into consideration the relatively unstable landscape of climate change policy.
“Weather events like the recent floods in Australia will continue to impact infrastructure, food security and property, contributing to material portfolio risk for institutional investors,” said CEO of the Investor Group on Climate Change in Australia, Nathan Fabian.
The authors of the report assert that climate change adds a 10% risk to some portfolio investments but that there is an opportunity arising out of the crisis–a $5 trillion dollar opportunity to be precise, and investors should consider investments in, say, renewable energy.
“Climate change brings fundamental implications for investment patterns, risks and rewards. Institutional investors should be factoring long-term considerations, such as climate change, into their strategic planning,” said Andrew Kirton, Chief Investment Officer at Mercer.
The other opportunity that the global warming crisis introduces is for innovation in climate change policy. Without a coherent framework to move forward, it seems that risks will be that much higher–and that much more unpredictable.
The report considers different scenarios for the year 2030, depending on how well developed climate change policies around the world are at that point. If, for example, leaders buckle down on climate change and implement strict policies to help reduce the effects of global warming, then “the uncertainties are lower than for the other scenarios, as investors are able to predict the pathways of policies with a reasonable degree of confidence,” says the report.