A few months ago, I asked whether climate change nuisance and public trust litigation might have something in common with litigation challenging bans on same-sex marriage. The idea was that both types of litigation seemed hopeless at the start and received very frosty receptions from the courts. However, in the case of same-sex marriage, plaintiffs kept plugging away and, much sooner than most people expected, a tipping point was reached. All of a sudden, it was the opponents’ position that seemed absurd.
Climate change is obviously some years behind; it certainly hasn’t reached the tipping point. I don’t know if it ever will. It might not.
Regardless, I was reminded of the tipping point concept in this context by the release this week by the Cambridge Institute for Sustainability Leadership of “Unhedgeable risk”, a study of how financial markets will respond to the long-term impacts of climate change. Modeling the response of different portfolios, the study concluded that:
Factors, including climate change policy, technological change, asset stranding, weather events and longer term physical impacts may lead to financial tipping points for which investors are not presently prepared.
This research shows that changing asset allocations among various asset classes and regions, combined with investing in sectors exhibiting low climate risk, can offset only half of the negative impacts on financial portfolios brought about by climate change. Climate change thus entails “unhedgeable risk” for investment portfolios.
I’m not a financial analyst, but it doesn’t sounds good to me.