Sunday, February 16, 2014

The link between climate change and financial markets: AMNT Open Day

Former Equity analyst and Climate Change expert Meg Brown was the next speaker at the AMNT open day. Meg accepts that while she clearly sees a obvious link between climate change and investments that not everyone shares her views.

She doesn't think that equity analysts are all that skillful. Their skill is mostly in the selling. It is all about "belief" and what you expect to happen.

How else can you explain that companies are still spending a colossal $674 Billion on looking for more fossil reserves when we can only at best burn 1/3rd of existing reserves without causing climate change disaster.

Meg used the example of UK coal electric power provider Drax which is successfully changing from burning coal to bio mass. It went from facing bankruptcy to becoming a profitable success by adapting its business to climate change.

Meg spoke about the current floods as being physical evidence of climate change and how we need to look at the impact on insurance companies. There was a bit of debate in the Q&A about whether the increase in insurance pay outs due to extreme weather in recent years is due to climate change or the development of the insurance industry.
We were then split into work groups and looked at different investment funds from point of view of climate change risk. This made me realise that the lack of transparency in many funds made this very difficult if not impossible with some funds. 

Some questions that Meg suggested we should be asking our fund managers - 

Q. Where is the climate change risk in our fund? (And what are you doing about it)

Q. How do you see this risk developing?

Q. How are you hedging that risk? 

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