Climate change could be terrible for stock prices. That’s according to How Does Climate Risk Affect Global Equity Valuations?’, a new study by the EDHEC-Risk Climate Impact Institute.
It estimates that if global warming is capped at 2 degrees, stock prices could decline less than 10 per cent. However, if close to no action is taken, global valuations could fall over 40 per cent.
Worse, if there is a climate tipping point – a critical temperature threshold where small changes trigger a fast and “often irreversible shift in the climate system” – losses would be likely to exceed 50 per cent.
Far from being alarmist, the authors say their modelling is conservative. In other words, climate change is not just an environmental issue; it’s a financial crisis in the making.
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