Daily Management Review

Amundi: Climate change affects investments


Amundi, the largest asset management company in Europe, noted that institutional investors are now taking the climate change seriously, Bloomberg writes.

"We are indeed seeing a turning point in institutional investors' attitude to climate change," said Frederik Samama, co-director of Amundi. "Until recently, they have not followed this issue, but the situation is changing and changing very quickly," he added.

The risks of global warming range from damage to physical assets from extreme weather conditions to falling prices for fossil fuel assets, as the world gradually abandons the burning of coal and oil. The largest investors are beginning to realize both threats and opportunities arising from problems related to the climate, Samama said.

"If we have this major shift in terms of how we manage the planet, of course, this will affect asset prices," he said. "Can we evaluate carmakers without taking into account the new bans on diesel cars? Can we assess the fossil fuel industry without taking into account the regulatory risks associated with the drop in prices for renewable energy sources? " In addition, the attitude of investors is influenced by the availability of "green" financial instruments.

Amundi manages assets of € 1.4 trillion. The company manages the world's largest fund of "green" bonds with the International Finance Corporation, a member of the World Bank Group. Amundi also developed "low-carbon" stock indexes by excluding stocks of companies polluting the environment from popular indexes such as the S&P 500 and MSCI indices.

The head of the Bank of England, Mark Carney, has repeatedly warned that the risks of climate change are not adequately assessed and that investors can face the "climatic Minsky moment" if they do not take any action. A Minsky moment is a sudden collapse in asset prices after a long period of growth. The theory is named after economist Hyman Minsky.

In 2015, representatives of almost 200 countries adopted the Paris Agreement. It was intended to keep growth of the average temperature on the planet "much lower" 2° C and "make an effort" to limit the temperature rise of 1.5° C compared to the pre-industrial level.

The agreement set the framework for countries to use clean energy and phase out fossil fuels. Each country presented a climate action plan that outlines ways to achieve these goals. Last year, US President Donald Trump announced his intention to withdraw from the agreement.

The World Economic Forum (WEF) in its Global Risk Report identified several major risks for 2018, including environmental threats from extreme weather and temperature. Environmental issues topped the list of the most likely threats in the report. Extreme weather events are seen as the most significant risk after a year of unusually frequent Atlantic storms.

source: bloomberg.com