Investors need to be aware of the risk climate change poses to their portfolio, warns Hargreaves Lansdown, as global warming breaches the 1.5C threshold for a consecutive year.
The investment platform said that despite commitments to climate action, current policies are falling short.
Climate change is expected to wipe 3.3% off the UK’s GDP by 2050 and 7.4% by 2100. On top of this, foreign trade will cause a further 1.1% fall in UK GDP as other countries experience the impacts of this crisis.
Insufficient mitigation, adaption and resilience on climate change also carries significant financial risks. Extreme weather and natural disasters, policy disruptions, disorderly transitions and reputational fallout could leave businesses vulnerable, impacting investor returns and consumer trust.
If all countries achieve their climate pledges, oil and gas demand will fall by 45% by 2050, but global demand will need to plummet by 75% to align with the 1.5C target, says Tara Clee, ESG analyst at Hargreaves Lansdown.
Clee said: “Limiting global warming to 1.5C is paramount to averting the catastrophic impacts of global heating. The drive towards net zero will bring about cleaner energy sources, healthier ecosystems and a more sustainable and resilient future for all.
“It’s vital that investors are aware of the risk climate change poses to their portfolio and recognise the opportunity in directing their savings to businesses on the forefront of delivering the necessary emissions reductions.”
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