October 05, 2020

Climate Risk Is Investment Risk

Melissa K. Scanlan

In January 2020, BlackRock, the world’s largest asset manager, announced it was placing environmental sustainability at the center of its $7 trillion investment approach. Having concluded that climate risk was investment risk, BlackRock predicted a very rapid movement of capital toward “sustainable” businesses. This action reflects a broader rethinking of the purpose of multinational corporations and their exposure to climate-related risks in light of the unprecedented need to swiftly decarbonize the global economy and meet the United Nation’s Sustainable Development Goals (SDGs). To avoid the worst scenarios of a climate-disrupted world requires extensive investment in mitigation and adaptation strategies in this decade. Companies that sit idly in the bleachers, instead of aggressively planning for a zero-fossil-fuel reality, run a greater risk of obsolete investments in “stranded assets.”

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