BlackRock, the world’s largest asset manager, warned in a recent report all investors should incorporate climate change awareness into their investment processes. Adapting portfolios to climate change would not hurt returns, BlackRock concludes.
Analysts at the company have started collecting environmental data and also follow closely political developments in the topic. Their report was actually published after the US and China submitted ratification documents about the Paris Agreement to the UNFCCC. The link to the report.
The risks are considerable, BlackRock said. After an extreme weather event hits a state, economic growth is 10 to 15% lower than usual that month and slower for many more months. On the other hand, climate change also represent opportunities like technological advances in energy storage, electric vehicles and energy efficiency.
BlackRock evaluate their investment portfolio’s exposure to climate change by calculating emissions as a percentage of a company’s sales; they examine exposure to income shocks from changing temperatures and calculate the sales a company generates with little physical waste.
It is expected that other investors will become increasingly interested in the impacts of climate change and climate regulation on their portfolio businesses.