Financial institutions and investors are increasingly interested in understanding what impact a changing climate and low carbon future will have on their portfolios. The broad scope of the challenge is becoming more and more clear: according to one recent estimate, 93% of the total U.S. equities market is exposed to material climate-related risks.
Climate risk is broader than regulatory risks associated with carbon emissions. Increased extreme weather events continue to rock the insurance industry, which is regularly paying record weather-related claims. Physical assets and day-to-day business operations in today’s “on-demand” economy may be damaged or disrupted by more intense climate events. Reduced availability of critical inputs such as fresh water or productive land can impact supply chains and customer markets. Infrastructure in certain high-risk geographic locations could be vulnerable. Banks’ balance sheets may be overburdened with loans to particularly exposed industries. Investors may face significant losses due to stranded assets. All companies may be exposed to climate-related legal liability.
Zizzo Strategy can help financial institutions and investors integrate climate risk into critical decision making frameworks to maximize long-term value.