5 Ways The Climate Emergency Is Affecting Investment

The world is waking up to the urgent need to take combat the biggest planetary threat of today, thanks to the sustained visibility about environmental issues and calls to action from campaigners, scientists and youth strikers. As world experts warned in a recent report, there is simply no time to lose in fight against the climate crisis, and significant steps forward will not be possible if corporations and investment firms do not take heed. 

Whilst decades-long demands for climate action have mostly fallen on deaf ears, the attention on the climate crisis in recent years has finally managed to start destabilising the walls of some of the most powerful firms in the world. Here are 5 ways that the climate emergency is pushing firms to realise that business-as-usual is no longer viable. 

1. BlackRock pledges to shun fossil fuel stocks 

After being widely criticised for greenwashing for its refusal to align their investment practices with the advice of climate change scientists, the world’s largest investment management firm recently signed onto the Climate Action 100+ pact. BlackRock, in the announcement, pledged to shun fossil fuel stocks and press all companies in their massive portfolio to change their operations to meet the Paris Agreement goal to limit temperature rise to under 2 degrees celsius. As such a huge name in the industry, BlackRock’s move means that firms that do not follow suit will receive further backlash, such as fellow investment giant Vanguard who was recently slammed for failing to take similar sustainability action.

2. Investors are now looking for more than monetary returns 

Climate attention is also driving the growth of impact investment amongst firms and individuals alike. The amount of money funnelled into environmental funds last year shattered records, pulling in US$20.6 billion in new money – quadruple the sum achieved in the previous year. This trend, which marks a shift away from the conventional culture of investment that prioritises monetary gains, is underpinned by the general awareness about our all our decisions and the impact it leaves behind on the planet. In particular, younger millennial investors have shown increased willingness in impact investment, and is driving the movement in Asia as well.

3. Bank of England is stress testing firms’ climate risk resistance 

The Bank of England is currently preparing to begin stress-testing financial firms and banks’ readiness for a fossil-free future. Currently, excess fossil fuel is counted as “wealth” on company balance sheets and stock market valuations, which could mean that when the world finally makes its much-needed transition into a zero-carbon and fossil-free economy, this could lead to a huge negative global financial ripple effect. In order to avoid this, the Bank of England is requiring financial corporations to demonstrate how prepared they are to face a carbon bubble burst. 

4. Climate-damaging companies are performing poorly

As public concern and global focus has increased about the climate crisis, companies that are accountable for the most pollution and damage to the environment have experienced significant downturn. Relentless reporting, activism and scientific consensus about the damage that dirty energy is having on our planet in driving the climate crisis is crippling profits. According to the Times, the value of energy companies in the S&P’s 500 increased at a slower rate at 2% over the past 10 years, while the broader market picture had tripled in the same time period. This poor performance, coupled with increased availability and funding into the clean energy sector, will lead to the demise of big oil within the next decade, according to analysts at BNP Paribas. 

5. Big companies want in on sustainable innovation

It’s becoming clear that companies working to make a positive impact on the planet have huge long-term profitability potential, and big brands are now waking up to this. Recently, the Belgian multinational brewing giant AB InBev unveiled their plans to create the world’s largest incubator program for sustainability solutions with their 100+ Accelerator, and have channeled their own funds to back these startups. Google too has launched a new social impact accelerator scheme to target startups within the clean tech sector.

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