Jul 21

How climate change could be a risk to your savings

Apr 21, 2021
· The more extreme and frequent weather events get, the higher the financial damage associated on property, but also on other parts of our economy.
· Meanwhile, more and more countries are committing to becoming carbon neutral in the next few decades. Though necessary, this transition is also a risk.
Local firefighters Richard LeBlanc and Richard Devlin respond to a house fire in the aftermath of Hurricane Delta in Lafayette, Louisiana, October 11, 2020.
LONDON — Climate change is increasingly influencing investment decisions, but it also poses certain risks to financial stability that are not being taken completely seriously, experts have told CNBC.
People are now much more aware of the issue, even those who have savings invested in carbon intensive companies, Yannis Dafermos, a lecturer at SOAS University of London, told CNBC. He added that as a result “they also realize they might face some financial losses, if they don’t do anything.”
As a result of the increased climate awareness, “there is now more pressure for instance on institutional investors and pension funds to adjust to the new reality,” Dafermos added.
Investments in ESG funds (which put either environmental, social or governance criteria at the heart of their decisions) have picked up in recent years, mainly in the wake of the coronavirus pandemic. Deloitte estimated last year that there could be 200 new ESG funds set up between 2020 and 2023, more than doubling the activity seen in the the previous three years.
But there are issues with ESG as whole, including a lack of transparency on what firms are actually doing in this field and the need for tougher regulation. And at the same time, ESG funds do not solve all the issues that climate change poses for markets.
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