Demystifying Climate Change from a Financial Perspective

‘How hot is your portfolio?’ Put your money where your future generations need it to be. 

In 2022, it is surprising that fossil fuels continue to have major market control. Oil and Gas can be/is still leveraged to start/stop wars, sink countries into depression and control global, national politics frequently. Divestment, some say, will only make the Oil and Gas sector more appealing and easier to buy. This notion, coupled with the fact, that very few people are aware of where their money goes, has impacted climate change considerably.

Given that we are out of time, it’s necessary to understand climate change mitigation measures from a financial perspective. Let’s face it, decarbonisation processes, while useful, are a relatively slow burner. Until the supply and storage of renewable energy is significantly increased, there will always be a global shortage, presenting these sources as more expensive. As we all know, like most aspects of a capital, free-market economy (more-or-less) money talks. Comparatively expensive measures, that are not ‘seen' as the norm will never be the first choice - behavioural and financial analysis will testify to this.

However, this does not mean that nothing can be done. An important step can be through controlling the flow of money i.e. invest wisely and shape the trajectory of the global economy – bit by bit.

As Alice Ross puts it, ‘People’s financial footprint is even more important than changes in their lifestyle as a consumer – the most powerful thing people can do in their lives is check where their investment is going’.

But I realise as I write this, investments are a grey area for many people. This blog will not break down the basics, apart from stating this obvious fact - To talk about investments, one needs to talk about risk. Understanding risk and your place in it, is one of the key aspects that allows a person to make investment choices suitable to them.

So make a choice – For anyone nervous to step into this world:

‘A report by the Bank of America declared that the 2020s are shaping up to be the decade of climate opportunity, predicting the climate solutions market could double in value from $1tn to $2tn by 2025.’ 

A word of caution: greenwashing is a term gaining significant traction. It presents a frustrating situation describing a superficial layer of climate change measures, beneath which lurk harmful global products - so do extensive research before choosing where to invest.

For references and more details on this topic, please read:

Investing to save the planet, Alice Ross Financial Times

Bronwyn King https://www.ted.com/talks/bronwyn_king_you_may_be_accidentally_investing_in_cigarette_companies?language=en