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Climate change is pushing governments and investment companies to factor in Environmental risk while making investment decisions
FREMONT CA: The climate crisis has changed the course of investment decisions made by some of the largest investment companies around the world. Fund managers are considering environmental risk as a primary factor while building portfolios. Governments around the world are constructing policies and spending billions to reduce emissions. The UN estimates investments of up to US$ 1 trillion every year for 30 years are required to reduce emissions substantially. Most of which will automatically be funded by the government. Recognising the increasing trend in government spending to tackle climate change, financial institutions are incorporating ESG factors in their investment decisions to build a sturdy portfolio.
Also See: Managing ESG
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The pandemic also played an important role in reshaping investment decisions. As the risk from climate change became evident, private investors and governments began considering environmental risk while making financial decisions. The Monetary Authority of Singapore has stated that US$2 billion of its funds will be invested with a group of fund managers having a strong track record in sustainable investing. Investors around the world have ample opportunities to invest in industries such as food, renewable energy and clean transportation that make the world a better place while increasing the profits of shareholders. The investment community needs to use sophisticated methods of climate risk assessment and management to better understand cross-portfolio climate risks. Data from unconventional sources such as satellite imagery, fluctuation of climate and air quality data can also be explored.
The onus for green investment does not only fall on central banks and governments. Financial institutions, governments and individuals all around the world have to come together to safeguard our future. We need to increase awareness about ESG and build innovative technologies for a sustainable future.
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