In December 2020 a report for Shropshire county council in the UK said annualised portfolio returns would be hit by just 0.1 per cent over 30 years if the world heated up by 4C. It’s one example of how climate risk reporting might be falling short; the UK Pensions Regulator warned earlier this month that the impact of some companies’ climate scenarios “appears to be at odds with established science”. Businesses and investors have focused on the cost and risk of decarbonising, but have failed to fully account for the physical impact of climate change, says the FT. A report earlier this year for Singapore’s sovereign wealth fund said that a global portfolio of 60 per cent equities and 40 per cent bonds would see cumulative returns over 40 years fall by between 10 and nearly 40 per cent compared to a baseline that assumed no climate change. Time to wake up.
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