Wall Street investors react to climate change

Some of the biggest investors on Wall Street are starting to take action on climate change, according to a first-ever survey of institutional investors. More than half of the respondents say climate risks affect their investment decisions.

Climate change is being felt on Wall Street, where investors are starting to take action. These are the findings of a new study conducted in part by the McCombs School of Business at The University of Texas at Austin.

From banks and insurers to pension and mutual funds, 97 per cent of 439 respondents believe global temperatures are rising, according to a statement. More than half say climate risks are already a factor in their investment decisions.

“These investors have accepted that climate change is happening,” said Laura Starks, finance professor at Texas McCombs. “They’re trying to come to terms with how it’s going to affect the risk and return of their portfolios.”

The survey also reveals how institutions are starting to act. Their tactics range from asking companies to catalog carbon emissions to backing shareholder resolutions. If institutions are not satisfied with executives’ responses, a few are divesting their shares, according to the statement.

Such measures are only the beginning, the survey suggests. Within five years, fully 91 per cent expect climate risks to be financially material to their investments. Within two years, 66 per cent fear physical impacts on their assets from extreme weather, rising sea levels or wildfires. Within five years, 78 per cent expect technological effects, as greener technologies unseat carbon-burning ones.

“The Paris accord means that different countries are going to have to start regulating carbon emissions more,” Starks said. “The industry, as a whole, is just in the early stages of tackling this issue.”

Photo credit: nakashi/ CC BY-SA 2.0

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