Stranded Assets
Investors Are in a Race to Find the Best Models of Climate Risk
Nobody wants their assets to wind up underwater in 20 years.
A luxury SUV sits submerged in floodwater in Lincoln, England.
Photographer: Christopher Furlong/Getty ImagesThis article is for subscribers only.
Sustainable finance is having a reasonably good pandemic. Environmental themed funds have had fewer outflows, and companies with better environmental, social, and governance ratings have tended to fare more lucratively than their peers.
It makes sense on an intuitive level. The pandemic reminds us of the fragility and importance of the physical world, and also of the threat of sudden, non-linear risks. This has dramatically accelerated the emergence of a hot new finance trend: assessing how potential climate change outcomes such as rising sea levels or heatwaves might affect the performance of an investment.