After a long hiatus, of Sustainability story The CFA Institute podcast is back. In the first new episode, Paul Andrews, Head of Research, Advocacy, and Standards at the CFA Institute, speaks with the President and CEO of Ceres. Mindy Lover On the important relationship between climate risk and financial risk.
Mindy Lover believes climate risk is financial risk and understanding this relationship is critical to addressing the threat.
“Our job is to argue that whether it’s climate change, water scarcity, or frankly many social problems, they have as much economic impact as any other.” she said. “They need to be part of the financial framework.”
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Businesses need to be aware of the impact of climate change on the economy and factor it into their decision-making processes, Lavers said. Investors can help by working with companies to set emissions reduction targets. Lava said the world’s top 100 companies are responsible for 80% of emissions, making their actions particularly important if climate change is to be stopped.
Bringing Stakeholders Together for Change
One of the obstacles to mitigating climate risks, Lavers said, is bringing together the various stakeholders involved and building consensus. She specifically addresses her four key groups: investors, the investment community, corporations, governments and authorities.
Reconciling all these different interests is not easy, but given the stakes, it is essential to do so. “If we don’t address the climate problem, the economic impact, the social impact, and the future we build for our children will be horrific,” she says. “So we really have to do it, and look at where the problem is and what the solution is.”
Problems arise where the system changes. Lava explains how the system changes. Ceres Accelerator for Sustainable Capital Markets Ensuring fair and consistent regulation across the economy can create lasting, positive change.
overcoming politicization
Finally, Lava acknowledges that the climate issue has been politicized, and that this politicization is a major barrier to further progress. In her view, the first job of corporate board members and investor fiduciaries is to analyze risk, so ignoring climate risk can lead to poor decision-making. But politicization only exacerbates the problem. “It’s sidetracking us and slowing things down,” she said. “The fact of the matter is the politics of hate, the politics of division, the awakened capitalist accusation that investors should not look at all the data at hand. It is insanity.”
So what can be done about this? Raber believes that fostering cooperation and consensus among stakeholders is key to driving change towards a more sustainable future. “The role of analysts and financiers is extremely important,” she says.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, and the opinions expressed do not necessarily reflect those of the CFA Institute or the author’s employer.
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