Climate change the biggest challenge facing the investment industry

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Only those investors who are able to take seriously the value destruction potential of climate change will survive.

Asset managers have a lot to worry about at the moment: from managing money in an environment where low and negative interest rates are distorting asset prices, to disruptive technologies that are changing the ways in which markets and assets can be analysed, accessed and valued.

“If you’ve been in London in the last few weeks, you would have been massively disrupted by the protests going on there,” he added. “That is just telling you that the collective society, and the world, is saying that we need to take this question much more seriously.”Green is far from alone in this belief. The same sentiment was shared earlier this month by the president and chief executive of State Street Global Advisors, the world’s third largest asset manager.

“I’ve been doing this for a while,” said Fuss. “Many times during this period, I have looked at things and said: ‘boy, I’ve never seen anything like this before’. That was easy to do in the early years, because I hadn’t seen much.These comments illustrate how a growing number of asset managers are realising the enormity of the challenge this presents to their businesses. That is because its potential impacts are largely unquantifiable, and are enormously long term.

“Consultants and clients are typically backward-looking,” Green noted. “But this is not a backward-looking problem you can solve. We love data and crunching spreadsheets to come up with answers, but this is not an answer that is going to come out of a spreadsheet.”Asset managers, as Green noted, therefore have to “think about this very differently”. As fiduciaries, they have a responsibility to be proactive because the risks in waiting to see how things play out are simply too great.

Another important consideration is how asset managers have the ability to influence how new markets develop.

 

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