Invest
Half the Aussie economy threatened by climate change
With 48 per cent of the Australian economy to be hit by climate change, investors have been urged to minimise their exposure to climate risk.
Half the Aussie economy threatened by climate change
With 48 per cent of the Australian economy to be hit by climate change, investors have been urged to minimise their exposure to climate risk.
Deloitte Consultants principal Sharanjit Paddam says climate change is too great an issue for investors to ignore.
“Investors are becoming increasingly aware of carbon exposure their investments have and that there are some big investment risks in fossil fuels and carbon that they don’t want to take,” Mr Paddam told nestegg.com.au.
“For example, if you were invested in the US coal industry over the last five years, you would have lost something like 99 per cent of the value of your money.”
It’s a reality reflected in Australia’s ratification of the Paris Agreement two weeks ago, joining other nations committed to limiting global warming to below two degrees.
Mr Paddam said that limit should encourage investors to divest from carbon-intensive industries, which will be structurally restricted by the Paris Agreement.
“If we are to maintain temperature rises of less than two degrees centigrade, then we can’t burn more than 20 per cent of the current proven reserves of coal and other fossil fuels, so it means that 80 per cent of carbon assets will never be realised,” he said.
Additionally, climate change is likely to become a growing concern for companies, with the recent suggestion that directors may be legally liable if they fail to safeguard the value of the company against climate risk.
“The president of the NSW Bar released a legal opinion a few weeks ago and he said that courts would regard climate change risk as being foreseeable at the present time and those company directors who fail to consider climate change risks now could be found liable for breaching their duty of care and diligence in the future,” Mr Paddam said.
The risks of falling valuations extend beyond companies and stocks however, with all asset types likely to be impacted in one way or another.
“Climate change has a pervasive, holistic impact on our economy. It’s going to affect a lot of sectors and it’s going to affect them at the same time,” Mr Paddam said.
“We expect the cost of insurance to rise as the cost of disasters rises, driven by climate change. Those with investment properties by the beach for example, like Collaroy, [Sydney] are going to see the values of their properties fall as coastal erosion takes hold.”
Australian superannuation especially, an industry worth trillions, remains heavily invested in carbon industries.
“The Assets Owner Disclosure Project’s latest findings show that around 55 per cent of superannuation funds are invested in carbon-intensive industries, so it’s a huge risk to the industry. If we see valuations of these companies falling, then we’re likely to see superannuation returns fall substantially,” Mr Paddam said.
As more investors consider the implications of climate risk, it’s likely companies will face mounting pressure to follow suit.
The international Financial Stability Board (FSB) has been charged with the task of creating climate-related financial disclosures that will make companies more transparent to meet this growing demand.
“The FSB is trying to get a single consistent accounting standard out that all entities can report under and that’s going to hopefully provide investors with much better information. While that’s going to be voluntary, I think there will a lot of pressure from investors through things like the ASX for companies to adopt that standard,” Mr Paddam said.
“It’s very clear that companies and boards of directors need to take action to preserve the value of their organisation in the face of climate risk.”
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
Property
More than 1 in 3 Aussie properties are cheaper to buy than rent
Having a mortgage is even more likely to be cheaper than renting than it was pre-pandemic, new research has revealed. ...Read more
Property
How will the moratorium on evictions impact landlords and tenants?
The NSW government has announced a 60-day moratorium on evictions, with landlords gifted incentives to reduce the burden on COVID-19-affected tenants. ...Read more
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Are property prices set to crash? Should you jump on board the fintok craze? And how to prepare for this tax time
Listen now
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
Property
More than 1 in 3 Aussie properties are cheaper to buy than rent
Having a mortgage is even more likely to be cheaper than renting than it was pre-pandemic, new research has revealed. ...Read more
Property
How will the moratorium on evictions impact landlords and tenants?
The NSW government has announced a 60-day moratorium on evictions, with landlords gifted incentives to reduce the burden on COVID-19-affected tenants. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
