Why carbon risk is an investment issue - new report from Hermes Investment Management
"Carbon risk is becoming ever-more important to investors. The current economic model is leading to a world that will exceed warming of 2°C and breaches the guidelines we, as a society, have set for ourselves. There is very strong evidence indicating it is too late to stop this," says Saker Nusseibeh, CEO, Hermes Investment Management in the company's report, Turning Down the Heat, which focuses on the risks carbon poses to investment portfolios.
The implications of climate change as a long-term gamble has started to shake up the investment community. A hotter globe will bring along new intricate and entwined layers of risks: Apart from having physical assets on the line, companies will also face financial, reputational and regulatory risks as the global economy continues its transition towards a low-carbon track.
Hermes, along with other major asset managers, is now exploring and developing a range of decarbonisation activities and strategies that are relevant to the various asset classes they invest in. In line with this, Hermes has carried out a comprehensive carbon footprint exercise with South Pole Group, who assessed Hermes' equities and bonds portfolios to enable them to understand their carbon risk and exposure. The detailed report outlines the four pillars of Hermes' strategy to mitigate this risk.