Climate change: the impact for investors

Climate change creates a wide range of adaptation, physical and transition risks. These risks can have material impacts on companies, investors, financial institutions and entire economies. And they will only increase until we stem greenhouse gas (GHG) emissions and then begin to reduce GHG levels in the atmosphere.

In this paper, we review the state of knowledge about the financial impacts of climate change for investors. This includes research examining the estimated economic costs of climate change, the materiality of those economic costs to investors, and the potential impact of climate risks on asset values.

Executive summary

• A growing body of research demonstrates the financial materiality of physical, transition and adaptation risks to companies, issuers and their investors.

• Investment to reduce or mitigate GHG emissions will lower the costs of physical risks arising from climate change, but trillions of dollars must also be spent to adapt the global economy to the new climate regime.

• Though many experts believe markets are widely underestimating climate-related risks, studies show that lower-emitting companies and those with transition plans have delivered financial outperformance.

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.