Climate Change to Reshape Global Investments by 2040
Climate change is set to significantly reshape global investments, with asset class compositions potentially more impacted than expected returns in the coming years. Robeco experts have, for the first time, factored in climate change's impact on expected annual returns for the next five years.
By 2040, global temperatures are projected to rise by at least 1.5 degrees Celsius, bringing more extreme weather events and higher climate risks, particularly in developed countries. Active investors can create value by incorporating their climate change views into investment decisions.
Economic uncertainty peaked in 2020 and 2021, surpassing levels seen in previous crises. However, technological breakthroughs offer cautious optimism for 2026. Emerging market equities and high-yield bond markets are currently more carbon-intensive than their developed market counterparts.
Robeco's 2023 global climate study found that institutional investors, such as pension funds, insurance companies, and asset managers, increasingly expect climate risk to play a central role in their portfolios. A massive divestment from fossil fuel companies could lead to a carbon risk premium, with investors expected to increasingly consider climate risk factors in their decisions over the next five years.
Climate change's impact on investments is becoming increasingly apparent. As global temperatures rise and extreme weather events become more frequent, investors must adapt their strategies to manage climate risk effectively. Technological advancements and a shift towards more sustainable investments offer opportunities for active investors to create value in the face of uncertainty.
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