Climate change erodes investors’ expectations
Investors, including superannuation holders, will need to revise their expectations downwards as a direct result of the impact of climate change, according to Frontier Advisors.
The firm said that there were a number of major secular themes which could potentially add to or detract from the long-term forecast for returns and it was the first time that Frontier had made a revision based specifically on the effects of climate change.
“As a result of analysis we have completed across a number of themes in this year’s review, we have lowered the likely returns we believe investors can expect, across all asset classes, by 0.25% per annum,” Philip Naylor, principal consultant at Frontier Advisors, said.
“The primary driver of this downward revision has been the long-term impact on the global economy of climate change.”
In its analysis the company focused on four themes of demographics, productivity and technology, inequality and climate change.
Following this, the firm’s downward revision was based on a best-case outcome that government’s around the world reduced carbon emissions and limit global warming
“There are costs of transitioning to a low carbon economy, but the long-term costs of global warming and extreme weather events are far greater. There are a number of possible future scenarios with the degree of impact dependent on a range of different policy path responses policymakers make in the future,” Naylor added.
Frontier said it completed modelling of a number of possible policy pathways and potential climate change impacts, including a more ambitious limiting of global warming to a two-degrees outcome, and pledges made under the “Paris Agreement” outcome.
Recommended for you
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
