Data drive for climate-resilient investing

Companies and asset managers must make a shift in thinking when it comes to assessing physical climate risk within their business models

Nothing about our current way of life is viable at a certain temperature above pre-industrial levels, and financial services and asset managers are in no way immune.

As Patrick Arber, group head of government engagement – sustainability at Aviva, recently commented at a City Week conference, “[Aviva is] not going to survive on a 3C or 4C planet.”

There is a 50/50 chance of breaching a 1.5C temperature rise this century, but this is not sufficiently factored into investments, according to Silvie Kreibiehl, sustainable finance expert and lead author of the latest Intergovernmental Panel on Climate Change (IPCC) report.

She recently told ESG Clarity: “Physical risks are completely underestimated by corporates, but also by the financial industry.”

But some responsible investors are starting to calculate and price exposure to the physical risks of a hotter Earth. However, getting hold of the data to do so is no easy task, and will require more regulation, engagement and transparency.

Read the full comment in ESG Clarity’s May 2022 digital magazine.