Keeping it real

As much of the UK and US are plunged into freezing temperatures this week so we hear the usual cries of climate change denial from those who think that a cold snap in winter undermines years of scientist research pointing to warmer temperatures overall.

National Geographic has been forced to write lengthy articles on why cold weather doesn’t mean climate change isn’t real, while other news reports remind readers that New York has seen its first snow for two years and the levels of flooding suffered in the UK are directly linked to global warming.

It is reassuring then that in this year’s PwC global CEO survey respondents are clear that climate change is a serious consideration for their businesses.

In our coverage of the research, we report that 45 per cent of CEOs are concerned about their long-term business viability as tech and climate pressures accelerate.

The survey finds that rather than viewing the climate transition as representing a death knell for their operations, CEOs see the shift as creating ample opportunities for growth. Nearly one-third expect climate change to shift the way they create, deliver, and capture value over the next three years – up from less than one-quarter who said as much regarding the past five years.

Encouragingly, three-quarters of respondents have either begun or completed steps to improve energy efficiency, while 58 per cent report having made similar strides when it comes to innovating new, climate-friendly products, services or technologies.

Investors too see climate change as an opportunity to look for new asset classes that are set to benefit from a green transition.

This week we bring you research from consultancy bfinance which shows “a remarkable swing of real asset appetite” away from property investment towards natural capital manager searches in the past year.

Investors see the returns from timber, agriculture and nature-based solutions as potential matches for their liability streams while also aligning with sustainable investment strategies.

But natural capital is far from straightforward for investors, with its environmental impact potentially coming into conflict with social and governance issues.

For example, it is all well and good planting a forest to act as a carbon capture mechanism, but if that creates new biodiversity issues or encroaches on indigenous land use, investors may find they are doing more harm than good.

Nikki Howard, Senior Associate Private Markets at bfinance, warns that not all asset managers are up to the job when it comes to dealing such ESG issues.

“ESG considerations are imperative to success in this sector, particularly the management of physical climate risks, biodiversity, and engagement with local communities. Not all asset managers are equally sophisticated in terms of approaches and resources.”

As ever in the world of sustainable investing, nothing is simple.

Gill Wadsworth, Editor

For live updates please follow us on Twitter and LinkedIn.