Climate change is a risk not only to the planet — it also threatens to blow up portfolios.
That’s according to Marisa Drew, the Impact Investing CEO at Credit Suisse. Drew told Yahoo Finance UK at the OneYoungWorld conference in London that investors should think twice about putting their cash in companies that don’t take into account the effects of climate change. Energy and real estate companies have particular climate change risks, she said.
“If someone has not priced in the risk, you could easily see something that seems like a great investment go to zero quickly,” Drew said.
Technological advances will enable the world to switch to renewable energy one day, sending the value of investments in fossil fuel companies plummeting, Drew said. Real estate investors looking at coastal property while ignoring the threat posed by rising sea levels are another example of how failing to take into account climate change can lead to losses, she said.
Drew is the latest voice in a rising chorus of voices to highlight the dangers that climate change poses for investors. The Institute for Energy Economics and Financial Analysis released a report this summer that argued BlackRock’s fossil fuel investments cost its investors $90 billion in lost value and missed opportunities over the last decade. A study published in the Journal of Financial Economics in March concluded that real estate in areas prone to sea level rise already is selling at a 7% discount to comparable properties.
“If someone has not priced in the risk, you could easily see something that seems like a great investment go to zero quickly.”
Credit Suisse is also looking at startups that can be “disruptors” as the world moves to a more sustainable economy, Drew said at the conference last week. She gave the example of plant-based burger maker Beyond Meat, which has gone from “zero to multi-billions” in its decade of existence.
Interest in impact investing has increased amid growing awareness about the impact of climate change in the world today, Drew said. There wasn’t nearly as much attention paid to the sector when climate change was looked at as a future problem.
“Now, it’s very real for people, when you have the California wildfires and it’s your house that burns down,” Drew said. “Or you have the electricity shut off. Or you have these increasingly violent storms that wipe out towns and villages. Now it’s real. So I think that there’s a visceral human response to say: I want to do something about this.”
- Credit Suisse announced in September that it aims to manage $100.7 billion in investments that align with environmental, social and corporate governance criteria by the end of 2020.
- UBS, the largest Swiss bank, has also made sustainable, impact investing a focus.
- Barclays announced on Oct. 29 that it was launching its Sustainable and Impact Banking unit as it joins other banks looking to generate high returns while helping solve problems.