Extinction Rebellion activasts spread pools which look like oil at the entrance of Africa Oil Week in protest of climate change at the Cape Town Convention Centre, in this November 05 2019 file photo. Picture: ESA ALEXANDER/SUNDAY TIMES
Several factors are driving the trend. First, a flurry of central banks are introducing climate stress tests for banks and insurers, following the lead of Bank of England governor Mark Carney. The insights these tests provide could be used by boards and investors to change practices in asset allocation and risk management.
However, the task force on climate-related financial disclosures has made progress in shaping a standard for voluntary disclosures by businesses, and more than 900 public and private sector organisations have signed up to support it. The quality of the data is steadily improving. Already some investors are starting to believe there could be large valuation dispersions between the leaders and the laggards. It is striking that large numbers of hedge funds are now looking into the investment opportunities and risks, complementing longer-term asset owners.
Another risk is if different policymakers create a cacophony of differing standards, data taxonomies and scenarios — let alone different environmental policies — which will be tough for boards and investors to interpret. This risk will be high on the agenda at Davos later this month, and also for Carney, in his new role as UN special envoy for climate action and finance.
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