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Asset managers must recognise that degrading ecosystems directly impact markets, supplychains, and long-term returns. As environmental conditions deteriorate, sectors such as agriculture, forestry, and fisheries face growing disruptions, translating into financial losses, operational instability, and declining asset values.
The evolving climate drives physical risks—damaged or strandedassets and business-interruption costs from severe weather events. For example, one provider calculates a company’s physical risk based solely on its headquarters location, despite its global supplychain stretching across far-flung manufacturing locations.
” Julie Gorte, Senior Vice President for SustainableInvesting at Impax Asset Management, advises asset owners to consider the upsides of this challenging and complex transition. Risk of strandedassets Many major asset owners and managers have vociferously supported the treaty.
indigenous populations), as well as working conditions throughout the supplychain (e.g. A sister of responsible investment is Impact Investing , which is a more proactive approach in investing with the ‘ intention to generate positive, measurable social and environmental impact alongside financial return.’
Mixed picture Do climate-related disclosures provide investors with the decision-useful information they need as they seek to reduce portfolios emissions while orientating capital to climate-positive investments? This has echoes of the issue of strandedassets arising from decarbonisation of the energy supply over the past decade or so.”
For financial institutions such as banks, insurance companies and investment managers, scope 3 emissions from supplychains and lending/investment portfolios are often more complex than for other industries. Clearly much more needs to be done to pivot towards more sustainableinvestment and lending practices.
Warwick Thompson says it is vital to reduce reliance on fossil fuels to minimise the risk of strandedassets. “The government needs to ensure the right policy landscape and incentives are in place in the economy for private finance to flow to the right areas, and away from the continued expansion of fossil fuel production,” he says.
Nature is at the base of every supplychain. For now, business understanding and disclosure of nature risk – both from investee firms’ direct operations and along their supplychains – is patchy at best, with firms in the APAC region lagging global peers. Ecosystem services are absolutely critical to the creation of GDP.
Sustainable capitalism also invites efforts to reinforce sustainability as a fiduciary issue, create advisory services for sustainableasset management, expand the range and depth of sustainableinvestment products; reconsider the appropriate definition for growth beyond GDP and integrate sustainability into business education at all levels.
Meanwhile, the US Inflation Reduction Act (IRA) , which was signed into law last year, includes direct support for port emissions reductions through electrification and will further contribute to building out the country’s domestic green ammonia supplychain through its clean hydrogen tax incentives.
In a letter to the Commission, WindEurope explained how low volumes of permitted projects have impacted Europe’s wind turbine manufacturers and wider supplychain. Increasing gas infrastructure must be avoided to avert dangerous climate impacts and strandedassets.”. Investing in a renewable future.
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