New investment opportunities, new risk-return calculations
Climate change might appear to be a slow burn issue for the financial sector. But growing consumer and business awareness, changing regulation, and a confluence of extreme weather events in recent years have convinced a wide range of financial institutions, largely in Western Europe and the U.S., to engage with this agenda. Climate change thus has become a phenomenon as much as a reality; and over the next 20 years will likely be affected as much by societal anticipation of future catastrophes as by actual physical events.
Climate change, and the range of pre-emptive actions that are already under way, is creating new markets and new risk-return calculations for financial services, as for all industries. Financial institutions, thanks to the high mobility of their capital, are much better equipped to react than many other industries. The capacity of financial institutions to hedge themselves and their customers against a range of business risks, develop new products to cater to changing demand, and invest in growing markets means the sector is inherently well-placed to cope with most of the scenarios that might materialize.
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