Invest
Climate change presents investment opportunity, provided infrastructure adapts
Invest
Climate change presents investment opportunity, provided infrastructure adapts
The World Economic Forum has highlighted climate change adaptation as one of the planet’s greatest risks. This means investors need to be vigilant, a major bank has warned.
Climate change presents investment opportunity, provided infrastructure adapts
The World Economic Forum has highlighted climate change adaptation as one of the planet’s greatest risks. This means investors need to be vigilant, a major bank has warned.
According to NAB’s head of sustainability, governance and risk, Rosemary Bissett, the current investment and physical climate means investors need to be thinking long term.
She explained in an investment insight: “Given the increased frequency and severity of extreme weather events in Australia, finance providers and developers need to factor in [climate change] adaptation when big assets and infrastructure pieces turn over. Trying to retrofit something later can be really expensive.”
Ms Bissett was responding to the World Economic Forum’s (WEF) warning emitted in January this year.
The WEF said the environment “dominates” the global risk landscape in terms of both impact and likelihood.
Writing for the agency, the group chief risk officer at Zurich Insurance Group, Cecilia Reyes said: “Climate change ranks as one of the top three trends to shape global developments over the next 10 years, and remains one of the truly existential risks to our world.
“Unlike the threat of nuclear weapons or pandemic disease, however, climate change ranks among the highest in terms of likelihood as well as impact.”
Further, a “failure of mitigation and adaptation to climate change” also presents a prominent global risk.
NAB said that, due to this, infrastructure assets worldwide must take this “increasingly bleak outlook into account at an earlier stage of development”.
What does this mean?
Given that the cost of climate change adaptation is forecast to rise between US$280 billion and US$500 billion per year by 2050 for developing countries, that means there’s a “serious shortfall” in infrastructure investments, NAB said.
Considering this, NAB’s corporate and institutional banking team explained that with increased competition for financial backing, investors are “demanding greater transparency about the environmental, social and governance (ESG) performance of real asset portfolios”.
“While most institutional investors are using ESG data to make more informed decisions, only 35 per cent are setting specific targets around these three areas,” NAB continued.
The head of the Global ESG Benchmark for Real Assets (GRESB) for the Asia Pacific, Ruben Langbroek attributed this to the fact that environmental issues still aren’t at the top of investors' lists of priorities.
He said: “Investment managers are focused on more tangible risks such as contamination at the asset level, health and safety, and regulatory risks.”
It doesn’t help that the number of climate change adaptation projects available for domestic funding is limited, despite Australia’s natural disaster bill forecast to reach $33 billion per annum by 2050.
Noting that the lack of activity could actually be a case of adaptation activity not being identified as such, NAB’s executive general manager of corporate finance Steve Lambert said: “There’s a lot of adaptation finance, particularly in the private sector, landing at the corporate level. But it isn’t broken out separately, so it’s not captured in any of these models or systems.”
When it comes to making ESG investment decisions and infrastructure plans, Mr Lambert highlighted the importance of local geographical climate data. However; “Trying to get micro-level data overlaid onto the big portfolios is really difficult. That’s an area where I think there is a gap domestically. The cost of trying to do that analysis, even in a region, is very expensive.”
The availability of data is crucial for “consistent decision making” he continued.
The head of responsible investment at QIC, Kate Bromley agreed. She called for “greater shared information around climate modelling”, given the complexity of climate change adaptation.
“Continued dialogue between government and industry, as well as collaborative dialogue between investors, is absolutely key. It’s a complex issue and being able to think about it holistically with other stakeholders goes a long way to addressing the questions we all have,” Ms Bromley concluded.
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
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
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
