Fund managers and other investors need to better incorporate climate change into their investing decisions, BlackRock says.
“Investors can no longer ignore climate change,” says a report from the firm issued Tuesday, which looks at how investors can mitigate climate risks, exploit opportunities and have a positive impact. “We believe climate factors have been under-appreciated and underpriced. Yet this could change as the effects of climate change become more visible.”
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BlackRock says more frequent and severe weather events over the long term pose market risks. Opportunities in technological advances like energy storage, electric vehicles or energy efficiency also have the potential for “undermining existing business models,” BlackRock says.
Other climate-related risks include regulatory changes affecting emissions standards, energy efficiency standards, subsidies or taxes, as well as social impacts such as changing consumer preferences and the influence of pressure groups that advocate for divesting fossil fuel assets.
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“The longer an asset owner’s time horizon, the more climate-related risks compound,” the report says. “Yet even short-term investors can be affected by regulatory and policy developments, the effect of rapid technological change or an extreme weather event.”
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