Unhedgeable Risk: Nov2015: University of Cambridge

No investor is "immune from the risks posed by climate change" ~ University of Cambridge, Cambridge Institute for Sustainability Leadership.

Excerpt from the Executive Summary: 'Short-term shifts in market sentiment induced by awareness of future, as yet unrealised, climate risks could lead to economic shocks, causing substantial losses in financial portfolio value within timescales that are relevant to all investors.

Factors, including climate change policy, technological change, asset stranding, weather events and longer term physical impacts may lead to financial tipping points for which investors are not presently prepared.'

Commissioned by the University of Cambridge Institute for Sustainability Leadership (CISL) and the Investment

Leaders Group (ILG), this report looks at the economic and financial impacts of climate risk over the next

five years in order to identify opportunities for reducing climate-related investment risks through portfolio

construction and diversification across different asset classes, regions and portfolios.

While the most significant physical impacts of climate change will probably be seen in the second half of this

century, financial markets could be affected much sooner, driven by the projections of likely future impacts,

changing regulations and shifting market sentiment. This study employs a unique approach to address these

short-term implications of our long-term climate problem in relation to portfolio risk. The complex analysis

presented here is the fruit of a collaborative effort between three research entities within the University of

Cambridge, namely the Cambridge Centre for Risk Studies (CRS), the Cambridge Centre for Climate Change

Mitigation Research (4CMR) and the Cambridge Judge Business School.