Investors must wake up to new climate game
Conviction, action and self-education are key amid concerns over global warming
The skill of an investor is to find price. In the case of equities, it is the price of a stock. In the case of debt, it is the bond price. The investor then determines whether the broader market has undervalued or overvalued the asset, and based on this either buys, holds or sells. But in the age of climate change, are investors able to find the right price? Does climate change throw up unknowns that even the most experienced investor is unable to detect?
We have a good idea what the cost of climate change is likely to be. Without any corrective action, the respected Stern Report of 2006 estimates a cumulative cost equating to 20% of global GDP, resulting from future extreme climatic events. However, climate change is more complex than this. At a granular level, it is impossible to accurately predict the cost or benefit of a changing climate to individual companies. This is problematic for advisers, individual investors and fund managers, whose job it is to predict future pric...