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Down but not out for climate risk

Good returns beat feeling good about your investments for the majority of investors, according to new research from the Association of Investment Companies. It asked investors what was most important to them in choosing an investment and close to 60 per cent of respondents ranked ESG as the least important of five factors (this was the case regardless of age). More than a third said they didn’t consider ESG at all when making investment decisions. In one way that’s not surprising – the whole purpose of investing is to grow your money, and it is perfectly possible to do your bit for the planet while not being too concerned about the ESG qualities of your portfolio.

But as we stressed in our cover feature a couple of weeks ago investors cannot ignore the climate change issue – it is a huge risk for shareholders, for companies and for governments. 

Governments understand the enormity of the climate change challenge – from the increased risk of global conflict all the way through to additional costs (for example decommissioning oil and gas installations, pipes and wells in the UK is expected to cost at least £25bn in tax relief). But as we saw at the COP26 gathering, some prefer to avoid the risk of economic disruption and shock even though climate change itself presents a potentially bigger, and uncontrollable threat to economic and financial stability.

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