What could a warmer world mean for investors?

Answering the climate challenge

14 Sep 2020

There is no doubt among the global investment community that we must take action now to avoid a climate crisis for future generations to come. Over the past decade, heightened awareness of the climate change challenge together with increased demand for climate-aware strategies has transformed climate investing from a nice-to-have to a must-have element of any investment decision.

Explore why we believe now more than ever is an opportune time for investors to consider allocating to climate aware investing.

Why is climate investing so imperative?

Current policies and commitments suggest average temperatures will increase 3°C by the end of this century. Do nothing and that figures rises to 4°C1 . Extreme weather events doubled between 2001 and 2019 while droughts and wildfires continue to increase exponentially. These physical effects have serious financial consequences. In addition, companies need to consider transitional risks including greater climate-related regulation as governments try to limit the impact of climate change and meet their Paris Agreement commitments.

Increased public awareness of climate change and its consequences are influencing societal preferences and behaviors and this is directly impacting companies’ cost of capital.

Climate aware investing at UBS-AM offers:

  • Opportunities to invest in economically viable solutions that help tackle climate change
  • An evolving opportunity set by reallocating capital to the climate change challenge which will require over USD 90 trillion of investment by 20302 in order to close the finance gap
  • Our climate aware investment framework which rests on three core pillars:
    • Climate adaptation: companies with products and services, providing solutions to a low-carbon future
    • Climate mitigation: companies that are leaders addressing climate change risks in their own operations
    • Climate transition: companies in carbon-heavy industries, transforming their existing business models
  • A suite of dedicated climate aware solutions across asset classes to help investors position themselves for the climate-smart future