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This article was first published by Climate Group.

Is climate change material to investment decision making? As asset managers, it’s a question that’s core to our fiduciary duty.

Recently, we’ve heard that requiring climate and other sustainability disclosures constitutes “mission creep” by the US Securities and Exchange Commission (SEC).1 In our view, that talk is just noise in the system. We consider the SEC’s actions an overdue recognition that climate risks and opportunities are material to investment outcomes.2

For 25 years, Impax has analysed the impact of environmental and social trends on global economic activity and investigated how climate change impacts financial performance.

Our conclusion: climate risks and opportunities are often mispriced by the market. To model the risks accurately, however, investors need companies’ climate disclosures to be both appropriate and comprehensive. Meanwhile, we believe deep research can help us understand the opportunities presented by companies that provide solutions to climate challenges. By avoiding depletive products and processes, these companies enable climate adaptation and mitigation.

Understanding the risks and seizing the opportunities

In our paper, Climate change: the impact for investors, we describe the points of consensus emerging from years of academic, industry and government research around two main sets of climate risk: ‘transition’ and ‘physical’ risks.

Transition risks are disruptive economic changes caused by shifts in regulation, technology and consumer preferences. The move toward net zero is creating differentials in corporate competitiveness. From adoption of low-carbon products and services to impairments against assets that are no longer viable, all of this is happening in real time.

The second family of risks – physical risks – is related to damages caused by more frequent and/or severe weather events and chronic conditions. There are acute physical risks, like hurricanes and heatwaves, and chronic physical risks, like sea level rise and permafrost melt.

As we’ve seen again this year, the consequences of these risks are enormous. Swiss Re estimates, for example, that global GDP could be 11% to 14% lower in 2050 than it would be in a world without climate change.3 It is becoming clear that the transition to a more sustainable economy isn’t unaffordable, but rather the hesitation to act on risks is.4

Transition and physical risks have already affected firm-level financial performance and are likely to be much greater than most expect. Insurers have raised prices for fire, flood and drought coverage, dampening real estate markets. Emissions regulations are raising the cost of carbon-intensive products for both producers and consumers, and carbon border adjustment taxes will only add to this. Appropriate company disclosures will allow us to better gauge the future ranges of these impacts.

We do expect firms generating solutions to create opportunities for investors in the years ahead. As detailed in our series The Transition Will Not Be Televised, we see clean electricity becoming the new backbone of our energy system, with high-growth firms emerging in upstream, midstream and downstream segments. This has the potential to help deliver a cleaner, safer and more affordable energy system in the US and beyond.

At Impax, we aim to price climate risks in every investment we make. Our goal is to make our portfolios resilient to transition and physical risks, while capturing the potential upside from higher growth rates associated with clean technology, renewable energy and enabling infrastructure. The data, methods and tools at our disposal are not perfect. But despite underlying uncertainties, we are well beyond a binary debate about whether climate change matters. We work toward a more sophisticated, probabilistic view of the magnitude of its financial impacts on assets, firms and portfolios.

To do that we need better company disclosure. While most large companies in developed markets currently report certain climate data, it is much more limited amongst smaller companies and those in emerging markets. Moreover, Scope 3 emissions reporting is broadly inadequate for investors to make fair comparisons among peers in any market.

The SEC, the world’s major central banks and recent international guidance all recognise the importance of this data.5,6 Only with more robust climate disclosure will we be able to gain a more complete picture of our investee companies and ultimately fulfil our fiduciary role.


1Ramonas, A., 29 June 2021: SEC ‘Mission Creep’ on Climate Ups Republican Lawsuit Threats, Bloomberg Law
Chon, G., 22 July 2022: Gary Gensler has set the SEC on a perilous path, Reuters
Pino, D., 19 January 2023: The SEC’s Political Games, National Review

2This view is confirmed by recent IFRS Guidance on Climate-Related Disclosures, as at July 2023      

3Swiss Re Institute, 2021: The economics of climate change: no action not an option

4International Monetary Fund, 2022: The Great Carbon Arbitrage

5The International Financial Reporting Standards Foundation, July 2023: Guidance on Climate-Related Disclosures

6Network for Greening the Financial System, 2023: Monetary policy and climate change: Key takeaways from the membership survey and areas for further analysis


Nothing presented herein is intended to constitute investment advice and no investment decision should be made solely based on this information. Nothing presented should be construed as a recommendation to purchase or sell a particular type of security or follow any investment technique or strategy. Information presented herein reflects Impax Asset Management’s views at a particular time. Such views are subject to change at any point and Impax Asset Management shall not be obligated to provide any notice. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. While Impax Asset Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made.

Julie Gorte, Ph.D.

Senior Vice President for Sustainable Investing

Julie is a leading figure in Impax Asset Management’s sustainable investing work, coordinating systemic engagement and the financial implications of integrating sustainability into investment decision-making. Julie researches the connections between sustainability and economic performance. She also tracks and develops insights into the impact of public policy on investment and communicates with public policymakers to help make public policy more favourable to sustainability and sustainable investing. Julie is a member of our Gender Analytics team and the Impax Sustainability Centre.

Prior to joining the firm, Julie headed up the social investment strategy at Calvert. She has held senior roles at the Congressional Office of Technology Assessment, The Wilderness Society, and the Environmental Protection Agency.

Julie serves on the boards of the Endangered Species Coalition, E4theFuture, Clean Production Action, the Forum for Sustainable and Responsible Investment (US SIF) and is the board chair of the Sustainable Investments Institute. She holds a Ph.D. and a master’s degree in resource economics from Michigan State University and has a bachelor’s degree in forest management from Northern Arizona University.

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Charlie Donovan

Senior Economic Advisor

Charlie Donovan is Senior Economic Advisor at Impax and Professor of Practice in the Department of Finance and Business Economics at the University of Washington. Charlie’s role at Impax deepens the firm’s expertise in understanding the opportunities arising from a global energy transition. He contributes to Impax’s thought leadership initiatives and provides insights on North American policy developments to Impax’s clients and investment teams. He is a member of the Impax Sustainability Centre.

Before joining lmpax in 2022, Charlie was previously Professor of Practice at Imperial College London and Founding Executive Director of lmperial’s Centre for Climate Finance and Investment. In his corporate career, Charlie was Head of Structuring and Valuation for Global Power at BP plc and part of the team that launched BP Alternative Energy in 2005 with an $8 billion funding commitment. He began his career as an Energy Policy Analyst at the US Environmental Protection Agency during the Clinton Administration.

Charlie is co-author and editor of Renewable Energy Finance: Powering the Future, now in its second edition. He holds a BA from the University of Washington, an MBA from Vanderbilt University, and gained a DBA (Doctor of Business Administration) in finance from IE Business School.

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