Quantifying the risks from Climate Change

CDP (formerly the Climate Disclosure Project) came out with a new report this week, their Global Climate Change Analysis for 2018. The summary of the report is well worth a read (it has some really great interactive charts if you’re a data nerd like I am), but there were a few takeaways that were so spectacular that we felt compelled to write a short post highlighting their findings. I’ll go through a few of the top quotes from the report and provide a little commentary of my own.

215 of the biggest global companies report almost $1 trillion at risk from climate impacts, with many likely to hit within the next 5 years

5 years is not a long time, especially for clients nearing retirement. We believe we have a duty to manage these risks in our investment portfolios.

Companies report potential $250 billion in losses due to the write-offs of assets

These are assets on the books, that contribute to the current valuations (and therefore stock prices) of many of these companies. In addition to “stranded asset risk” from fossil fuel reserves that cannot be extracted or burned, this number includes the damaging impacts from severe weather and other impacts from climate change.

Climate business opportunities calculated at $2.1 trillion, nearly all of which are highly likely or virtually certain

THIS is the opportunity for sustainable investing. By investing through the lens of sustainability as we do, we hope to capture these opportunities in our portfolios while mitigating the risks from climate change.

Potential value of sustainable business opportunities almost 7x the cost of realizing them ($311 billion in costs, $2.1 trillion in opportunities)

There are more takeaways, which you can read a summery of at CDP’s Press Release on the report, (where these quotes were pulled from). They highlight the challenges that disclosure still faces, but as investment advisors, the message to us is clear:

• Climate risk must be managed in investment portfolios.
• These risks are not something that future generations alone will bear – we are feeling the impacts today, and business leaders expect these impacts to accelerate to the point where there are material effects on their bottom line within the next 5 years.
• We have to act. Our firm is doing our part as much as we can – from building sustainable portfolios, to offering no-minumum fossil fuel free portfolios so anyone can join our movement.

I hope you’ll be motivated to join us. Click the link in the bottom right corner of this page to schedule an appointment with us to learn how you can join our community and use your investments to create change.