Zehrid Osmani, Portfolio Manager of Martin Currie Global Portfolio Trust
The planet is getting hotter. Humans have never lived in a world much warmer than ours today and temperatures are expected to continue to rise rapidly.
The effects are already being felt. Extreme weather events, water scarcity, food shortages and rising sea levels all pose a serious threat to societies, economies, and ecosystems.
With the impact of global warming predicted to become increasingly severe in the coming years, investors should now think carefully about climate-change implications in their decision making.
Climate change risks
Broadly, there are two types of risks that investors need to consider regarding climate change.
‘Physical risks’ relate directly to the impact that directly affect the companies through climatic or weather-related evets. For instance, damage to property and disruption of supply chains. These can have an immediate impact on corporate profitability and on share prices.
‘Transition risks’ are less obvious, but no less meaningful and relate to the move towards a lower-carbon
Change is happening
For the latter, we are seeing renewed efforts by policy makers globally to reduce carbon emissions, which are the primary cause of increasing temperatures.
An increasing number of countries have now committed to reaching net-zero emissions. Most recently, the European Union set out its ambitions to become the first climate-neutral continent by 2050 unveiling its ‘Green Deal’ – a €750 billion ‘green’ stimulus package.
Being ‘climate aware’
This all means that investors need to consider not only how the operational ability of companies will be impacted by climate change, but also the effects of regulation and changing consumer sentiment.
However, the transition to a lower-carbon economy will also present investors with opportunities where companies produce goods or services that contribute to, or benefit from, these changes; for example, in building energy efficiency, renewable energy and carbon-neutral transportation such as electric vehicles.
Climate change forms a fundamental part of the investment analysis for the Martin Currie Global Portfolio Trust. Find out more about its approach to ESG and stewardship at www.martincurrieglobal.com
Zehrid is a panellist at The Scotsman’s free Annual Investment Conference on Tuesday 30th March in association with Martin Currie Global Portfolio Trust and Rathbones. Register here.