Mlinda was one of several organisations to support the Economist Intelligence Unit’s report “The cost of inaction: Recognising the value at risk from climate change” which looks into the long term financial risk of climate change to investors. The research concludes that the value at risk to manageable assets from climate change are calculated to be US$4.2trn, in present value terms. The tail risks are more extreme; 6°C of warming could lead to a present value loss worth US$13.8trn, using private-sector discount rates. From the public-sector perspective, 6°C of warming represents present value losses worth US$43trn—30% of the entire stock of the world’s manageable assets.
Brian Gardner, the editor of the report, said: “Investors currently face a stark choice. Either they will experience impairments to their holdings in fossil-fuel companies should robust regulatory action on climate change take place, or they will face substantial losses across the entire portfolio of manageable assets should little mitigation of climate risk be forthcoming. Charting a path away from these two options should be a strong motivation for long-term investors to engage with companies in their portfolios and to shift investments towards a profitable, low-carbon future.”
The report confirms Mlinda’s long held belief that investors bear significant influence on changing modes of production that contribute to climate change. The investment portfolios that drive our economic system are often based on short to mid-term risk-adjusted returns, with little thought for the long-term inefficiencies and instabilities that this creates. By concentrating on short-term growth at any cost, we undermine the resources that are vital to long-term growth. The report points investors to ways in which their investments can reduce the threats to climate change as well as safeguard long term financial stability.
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