I am beginning to think so.
The Intergovernmental Panel on Climate Change (IPCC), tasked with assessing the science relating to climate change, has recently warned that the rise in average global temperature to less than 2˚C above pre-industrial levels in this century (à la the 2015 Paris Agreement) will require dramatic changes in the way energy is produced and distributed to pre-empt irreversible damage.
In Dr. Mark Carney’s 2015 landmark speech ‘Breaking the tragedy of the horizon’, as the former Governor of the Bank of England, he singled out various climate risks that could have a material impact on companies and their stock market valuations.
He highlighted the following: extreme and frequent weather events, as global warming continues apace; stranded assets, as fossil fuels are phased out over time; and liability risks, as third parties seek compensation for collateral damage.
Until recently, capital markets have been slow in factoring these risks into securities’ prices. But in hindsight, COVID-19 might well prove a game changer.
This is because I have been struck by how it delivered a devastating reminder of the unbalanced relationship between humans and nature. It has given investors a real taste of how environmental shocks – unlike economic ones – can roil the markets and whipsaw their portfolios at a speed once unimaginable.
In a recent report by KPMG International and Eversheds Sutherland ‘Climate change and corporate value’, 46 percent of leaders from some of the world’s leading organizations stated that COVID-19 has led to a better understanding of what it means to be climate resilient.
It has moved many of the old ‘unknown unknowns’ of climate change impacts into the realm of experience. No wonder funds centred on climate change have emerged as star performers amid the stock market carnage of March 2020.
Two years ago, no major economy was committed to net-zero carbon emissions. Unsurprisingly, now eight of the top 12 economic nations are: Canada, China, France, Germany, Italy, Japan, South Korea and the UK. The US will soon join under President Joe Biden.