We now know that the world risks a grim future even if the global economy is decarbonised rapidly, according to a landmark report on climate change. The assessment makes clear: inaction is simply not an option for policymakers, companies and investors.
But the paper from the Intergovernmental Panel on Climate Change, whose investment implications we discuss throughout our new CIO update, not only emphasises risks such as devastating weather events. It also points towards huge opportunities for those willing to act today to have a positive impact for decades – and generations – to come.
As the global economy continues to recover from the pandemic, albeit haltingly, and world leaders prepare to gather at the COP26 summit in Glasgow, we are focusing this CIO autumn update on what the challenge posed by the climate crisis means for our clients. And how just as there is much to fear, there is also cause for hope and even excitement.
In the update, we outline climate scenarios facing the world and how investors can help to avert the worst outcomes, in addition to providing our regular macro and market analysis.
Other topics include:
- The underwhelming nature of ‘green’ fiscal stimulus
- How asset allocators can generate sustainable returns while fighting climate change
- Investing in green tech as the key to decarbonisation
We also discuss ways to address pressing environmental, social and governance (ESG) challenges while meeting long-term cashflow needs, and how China’s macroprudential measures could help create room to meet climate targets.
Taken together, the contributions from teams across LGIM indicate that markets are at an ESG inflection point.
With the pricing of ESG factors still patchy, partly due to the availability and quality of data, there are clear advantages for investors with the capabilities to take forward-looking, strategic views of companies, sectors and markets. At the same time, accelerating long-term trends continue to present potent investment opportunities, from climate solutions to data as an asset and digitisation.
Indeed, is it any wonder that more and more end investors are demanding that analysis of criteria like climate risk become part-and-parcel of the investment process?
The experience of COVID-19 has intensified such demands, as the pandemic has reminded us all of the value of early, meaningful action to head off looming threats. In less than two months, world leaders will have a chance to demonstrate that they have learnt this lesson with regard to the era-defining challenge of climate change.
At LGIM, to highlight the urgent need for climate action in the run-up to COP26, we have launched a global partnership with Lewis Pugh, the endurance swimmer and environmental campaigner, in addition to taking the steps about which you will read in the CIO update.
We are united with Lewis in our aim to tackle the climate crisis – as well as associated dangers, such as the threat to biodiversity. This mission is critical to our purpose: creating a better future through responsible investing.
Photo credit: Olle Nordell