Helene Winch, Head of Responsible Investing at Premier Miton shares why we might experience more financial related systemic risk without stronger action to mitigate climate change.
For information purposes only. Any views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
Investing involves risk. Premier Miton is unable to provide investment, tax or financial planning advice. We recommend that you discuss any investment decisions with a financial adviser.
Please refer to the glossary at the end of the document.
As we enter 2025, it’s interesting to reflect on the progress we have made on climate change since the Paris Agreement in 2015 and the global commitment to act to keep global warming below 1.5 degrees Centigrade.
The UK has a Climate Change Act and renewed global leadership on green finance from a number of experienced politicians who are now back in the government.
During 2024:
- According to Ember, 37% of the Uk’s electricity came from low carbon renewable sources, well on our way to the new government target.
- LSEG have reported that 932 green bonds issued, representing $389.4 bn (at end of September 2024), an increase on 2023.
- The UK Green taxonomy was revived in the Mansion House speech which focussed on various related sustainable finance announcements.
However, 2024 was forecasted to be another “warmest year on record” and to formally breach the 1.5 degrees centigrade of warming since pre-industrial levels that is commonly referenced as the target when net zero carbon goals are discussed.
Have we failed? Do we need to reframe our actions and goals now that 1.5 has been missed?
Action to limit climate warming as much as possible through supportive action to reduce carbon emissions will continue. The “1.5 degrees” is a long-term target that is still possible.
The real-world target is peak oil, which is the point at which global oil production reaches its maximum and then begins to decline in an irreversible way, and the associated peak carbon emissions that we are hopefully close to.
Without stronger action to mitigate climate change, we will experience more financial related systemic risk from climate change including more extreme weather events alongside increased biodiversity loss.
Refocusing on planning and investment required in advance of a warming climate helps ensure that the companies and assets that we invest in are more able to cope with a warming climate. This may be, understanding potential challenges with overseas suppliers who may be dependent on ports that can’t operate at higher sea levels, as well as weather related risks such as flooding or overheating to physical infrastructure such as buildings.
At Premier Miton, we continue to make progress towards our net zero targets, including encouraging our investee companies to set carbon reduction targets and publish transition plans, holding green bonds and investing in companies whose activities deliver low carbon products and services.