Investment firms take climate change seriously as they look to mitigate risks to their portfolio

Climate change is prompting a growing trend among investment firms to assets that are resilient to climate risk, as the increasing intensity of extreme weather events such as hurricanes and flooding lead to a surge in insurance premiums, higher capital expenditure and operational costs.

A joint study conducted by US think tank Urban Land Institute and US real estate management firm Heitman, showed that residential and commercial property that are exposed to risk of floods or sea-level rise, have seen their values rise much more slowly and in some cases they are rapidly losing value.

According to the United Nations, a continued rise in global temperatures of 2 degree Celsius and higher could expose a huge portion of the world population to water stress, increase heat-related deaths and cause more forest fires. Meanwhile, the accumulation of greenhouse gases has warmed the atmosphere and intensified rainfall by as much as 10 per cent during the most destructive hurricanes and typhoons in recent years.

Limiting global temperature rise to 1.5 degrees would lessen the risk of long-lasting irreversible changes.

Tim Crockford, portfolio manager at London-based Hermes Investment Management, which manages assets worth £33.5 billion (US$44 billion), said that companies are addressing long-term risks so as to remain resilient to the world around them.