As climate change is becoming increasingly more prominent in people’s minds, it is also becoming a key risk factor for investors, according to the BlackRock Investment Institute.
In the lead up to the United Nations conference on climate change, BlackRock Investment Institute said it is looking at the likely impact of climate change on investors and investment outcomes.
“Even if you are sceptical of global warming and its causes, no one should ignore that significant regulatory, economic and technological factors make this a major investment issue,” BlackRock Investment Institute Australian strategist Steve Miller said.
“Investors, corporations and governments are focusing on the risks and opportunities, as well as how best to tackle the challenges that are arising.
“These profound changes have the potential to affect asset prices in all areas for a long time to come,” he said.
Outlining key highlights in its report, titled The Price of Climate Change: Global warming’s impact on portfolios, BlackRock said momentum behind mitigating climate risks in portfolios is building.
“BlackRock views environmental, social and governance excellence of asset owners as a mark of operational and management quality. It means responsiveness to evolving market trends, resilience to regulatory risk, and more engaged and productive employees,” the report said.
“Divesting from climate-unfriendly businesses is one option. The biggest polluting companies, however, have the greatest capacity for improvement. Engagement with corporate management teams can help effect positive change, especially for big institutional investors with long holding periods.”