Aggressive Climate Action Needed to Preserve Stocks' Value, Paper Says
U.S.News 10/07/2024
"Decision makers should pursue aggressive policies to bring climate change under control if they want to avoid losses in the value of global stocks that could top 50%, think-tank EDHEC-Risk Climate Impact warned in a 74-page paper published on Wednesday.
WHY IT'S IMPORTANT
The report aims to show investors how physical climate damage, along with the costs of transition, can have a material impact on the value of stocks. It's also relevant to regulators who want to understand how a loss in value in climate-sensitive assets held at systemically important financial institutions could ultimately threaten financial stability, it said.
BY THE NUMBERS
The magnitude of losses depends on how aggressive emissions-cutting policy is. More than 40% of global equity value is at risk in a "close-to-no-action" case, with losses potentially surging above 50% near climate tipping-points, the study concludes. "Prompt and robust" action is needed to keep losses below 10%.
KEY QUOTE
"Current valuations are most consistent with two market beliefs: either that very strong and effective abatement action will be undertaken, and climate change will therefore be brought under control; or that climate change, even if poorly abated, will have a negligible effect on economic output and consumption. Since neither assumption should be considered a very likely scenario, we have argued that there is ample potential for equity revaluation", read the report by a research team led by professor Riccardo Rebonato."
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Aggressive Climate Action Needed to Preserve Stocks' Value, Paper Says
About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 15 business schools. Fully international and directly connected to the business world, EDHEC commands a strong reputation for research excellence and the ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching is inspired by its research work and a focus on “learning by doing”, all with the aim of equipping people with the skills to succeed in business.
