The global and all pervasive nature of climate change means that it poses a risk, to some extent, to every business and investment portfolio.
This risk is beginning to be more widely recognised by businesses across the globe. According to the Asset Owner Disclosure Project (AODP) the majority (60%) of global investor heavyweights recognise the financial risks of climate change.
However there is still significant resistance to among some Australian businesses. This is primarily due to the short-term focus on financial returns. Alarmingly the AODP also found that only 6% of businesses in the index are considering the risk of stranded assets.
The Australian Prudential Regulation Authority, says it is unsafe for companies to ignore the risks of climate change just because there is some uncertainty, or even some controversy, about the policy outlook.
Smart investors are now seeking greater disclosure from businesses they are seeking to invest in, providing a greater incentive to understand and manage climate risk. Where there is risk there is also opportunity.
there was still “enormous resistance” among Australia’s asset owners because they tend to “take a very short-term focus, and rely on short-term remuneration, so they won’t take a medium to long-term challenge on easily”.