Investing in Climate Change 2011, The Mega-Trend Continues

In previous reports we looked at the performance potential of climate change related investment. In this report, we shift our focus to examine in more detail how investors can manage the multifarious risks that ultimately are driven by the potential physical impact of climate change on industry and society.
 
This shift in focus reflects the considerable uncertainty both in markets and in government policy related to climate change throughout 2010. In response to this uncertainty, institutional investors are giving greater consideration than ever before to climate change in their assessment of asset allocation. It is confirmation of the importance of this trend among investors that Mercer Investment Consulting has just published a report looking at the issue of climate change risk at a portfolio level.

We have reached a critical point in our industry. It is the point at which all the talk about climate change begins to translate into action. While politicians and others in some parts of the world prevaricate, asset owners everywhere are starting to move. Naturally, their first impulse is to identify where in their portfolios the climate risk lies. Their next impulse is to adjust their allocations to take account of this. To do so effectively and efficiently, they need a new intellectual framework and set of tools. And they need them now. 
 
We have therefore used this report to study the risks associated with climate change investing across different asset classes and provide frameworks to understand how asset managers can handle those risks. And we examine how various climate change strategies can be added to a portfolio as investors make their allocations. We believe our report complements Mercer’s portfolio level work by digging more deeply into the question of risk in different asset classes than any climate research of which we are aware.