The German Finance Ministry has commissioned a report looking at the risks that climate change poses to the country's financial market. South Pole Group, which provides research and data associated with carbon emissions reduction, has been tasked to assess stranded asset risk, pricing mechanisms for carbon and other climate-related resources, and investor requirements for non-financial data.
The firm last September completed a similar report for the Swiss Federal Office for the Environment, which showed that Swiss equity funds have footprints of some 56 million tonnes of carbon – roughly the same as the country's total annual emissions. South Pole Group used a series of future carbon-pricing scenarios to calculate the potential costs associated with these emissions, and concluded that up to 40% of the average financial returns of these funds could be at risk.
"Governments and regulators around the world are, in our experience, increasingly concerned about the implications of climate change on financial market stability," said Maximilian Horster, a partner at South Pole Group specialising in climate neutral investments. "While [the question of] if and how to address the topic will differ quite significantly from country to country, currently those responsible in different capacities for financial markets around the world are seeking to gain an understanding."
The results of the report commissioned by the German Finance Ministry are expected to be released in August or September.