From the desk of John Cleveland
Climate change is a potentially disruptive risk for institutional investors and asset managers, but it doesn’t have to be. In fact, asset managers can and should step ahead of the pack and mitigate climate risks and exploit climate opportunities, according to a recent report by New York global investment management firm, BlackRock. The firm is the largest asset manager in the world, with over $5 trillion in assets under management.
The report, Adapting Portfolios to Climate Change, creates a systematic guide to the physical, technological, regulatory and social risks presented by climate change.
The report suggests ways that asset owners can incorporate climate factors into their management strategies to reduce risks and seize opportunities. It also advocates for smart incentives to accelerate the transition to a low-carbon economy, including: reducing fossil fuel subsidies; creating consistent carbon prices; mandating higher energy efficiency standards; and setting standards for consistent measurement and reporting of climate factors.
In the report, authors conclude that: “Climate–aware investing is possible without compromising on traditional goals of maximizing investment returns. We believe all institutional investors should incorporate climate change awareness into their investment processes.”
When the largest asset manager in the world comes to this conclusion, it is a hopeful sign that the kind of work the Green Ribbon Commission and the City of Boston are doing to advance climate leadership is finally becoming a mainstream factor in global asset management and investment. This can do nothing but bring positive returns.
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