Forum Views - January 2024
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10
FORUM VIEWS - JANUARY 2024
are bad for our health, bad for the planet, and create
significant costs for taxpayers. We can already see a
growing number of companies focusing on health and
healthy foods and this trend will be supported by an
increased focus from governments on addressing the
system costs that irresponsible food marketing causes.
Food environments and food architecture will be
reshaped as a result creating further investment
opportunities.
Early financial planning is crucial in mitigating the impacts of
climate change.
Crafting individual investment portfolios that align with the
Paris climate goals and the Kunming-Montreal Global
Biodiversity Framework is a basic step that will help to
protect capital against future losses, and investing in
sustainable businesses and divesting from those causing
harm aligns financial security with sustainability efforts.
Diversified portfolios that favour sustainable assets provide a
buffer against market volatility resulting from climate-related
risks, and there are a growing number of financial products
(such as ETFs) that make this easier.
However, there is a not a one-size-fits-all solution. In crafting
a financial strategy that safeguards their interests and
empowers climate action, individuals should align their
choices with their environmental and social values, and move
away from the old-fashioned approach that simply
encouraged a focus on ‘risk appetite’.
Aligning personal finance with one’s values provides a much
stronger underpinning investment philosophy than a simple
focus on expected returns, in no small part because historic
investment returns are likely to prove a poor indicator of
future returns as we transition from the stable Holocene to
the unpredictable Anthropocene. As the adverts say, ‘past
performance is no indicator of future returns’ and that has
never been more true than today.
As we confront the complexities of climate change, both on a
global and individual scale, proactive and sustainable
financial practices are key to building resilience in the face of
an increasingly uncertain future. But individual action alone
will not be enough. Governments and financial institutions
must champion policies and investments that achieve net
zero, foster climate resilience, restore and enhance
biodiversity, and ensure a just transition to a new, greener
economy that enhances the well-being of all, not the survival
of the few.
Conclusion
Governments and financial
institutions must champion
policies and investments that
achieve net zero, foster climate
resilience, restore and enhance
biodiversity, and ensure a just
transition to a new, greener
economy that enhances the
well-being of all, not the
survival of the few.
Broader business trends to watch
Investment strategies for individuals
Insurance becomes a key tool in maintaining financial
resilience against climate-related risks. However, that also
means that insurance premiums will increase as the
insurance companies respond to demand while also facing
an underlying increase in the risks of climate and nature-
related losses (and costs of restoration).
Innovative financial tools, such as sustainability-linked
bonds, offer promising solutions, both for companies and for
governments. These instruments tie financial outcomes to
sustainable targets, promoting responsible financial
practices, and often achieve cheaper financing for the
companies or governments issuing them.
Individuals, too, must navigate the financial implications of
climate change. Voting for environmentally conscious
governments and/or supporting positive environmental
policies is a crucial step, but personal financial decisions also
play a vital role.
Governments and financial institutions play a pivotal role in
preparing individuals for these challenges. Transparent
communication, clear transition strategies, and the
redirection of financial resources toward sustainable
initiatives are essential components of this preparation.
Peter Elwin is Director of Fixed Income, and Head of the Food & Land Use
Programme, at financial think tank Planet Tracker and has over 20 years of
financial markets experience in senior management and functional roles on the
buy side and sell side. His experience covers food systems, equity and credit
research, accounting, valuation, natural capital, sustainability, strategy, and
operations.
Peter was previously Head of Research at the Universities Superannuation
Scheme (USS), one of the largest UK private pension schemes with over £60bn
under management. Before joining USS, Peter was Deputy Head of European
Research and the #1-rated Global Head of Pensions, Valuation, & Accounting
research at JP Morgan. He is the lead author of Planet Tracker’s award-winning
Financial Markets Roadmap for Transforming the Global Food System.
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