Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
ThinkAdvisor

Portfolio > Investment VIPs

Climate Change Grabs Savvy Investors’ Attention

X
Your article was successfully shared with the contacts you provided.

When the U.N. released its latest report on the impact of climate change on everything from the ecosystem to the health of humans and animals, smart investors took note and considered the ramifications for their strategies.

“You just have to take climate change into consideration, there’s no way around it,” said Michael Underhill, founding partner of Capital Innovations, an investment firm dedicated to sustainable investing. “In addition to company filings and other reports that investors look at, they should also be looking at reports from the United Nations, the World Bank and other international agencies on sustainability, because investing today is like peeling back the layers of an onion and requires multiple layers of research.”

The U.N. report, from the Intergovernmental Panel on Climate Change, was released in March and was the latest to show how human-caused climate change has a widespread and lasing impact on agriculture, ecosystems, health – animal as well as human – and that it affects a number of industries as well.

Regardless of the industry investors are looking at, Underhill believes climate change has an influence.

“Whether you’re in California dealing with a state of emergency due to drought, in Chicago dealing with the polar vortex and arctic temperatures, whether you’re in Southeast Asia contending with cyclones or in the U.K., where the Thames River was flooding, it’s clear that what we’ve seen are not just statistical anomalies in the weather but changes in weather patterns,” he said. “These changes have a knock-on effect on any industry, so doing things the right way means having a much more long-term, sustainable investment plan in mind.”

According to the Networks of the Global Investor Coalition on Climate Change, more and more investors are indeed considering climate change to be one of the most important parameters when it comes to investment.

In the organization’s 2013 report, the majority of respondents said they continue to view climate change as having a material risk across their total portfolio and reference the issue in their investment policies.

Six percent of asset owners conducted formal or informal climate risk assessments of their portfolios, while 25% of asset owners made changes to their investment strategy or decision-making process in 2012 as a result of climate risk assessments, the report stated, even as it surmised that translating investor commitment to climate change into investment decisions that leverage climate-related investment opportunities remain a challenge, particularly in the absence of more robust legal frameworks.

Nevertheless, Underhill is getting calls from an increased number of mutual funds and other investors that are interested in Capital Innovation’s proprietary tools to help assess a company’s real value by including climate change, corporate responsibility and sustainability measures in the valuation process.

He notes an increased interest in the global agribusiness industry, which is set to experience significant changes as demand for food and feed increases, at the same time as the need for bio fuels rises.

New opportunities are being created across the agribusiness value chain, he said, as upstream exposure in production factors like fertilizers or machinery become ever more important.


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.