Why investors need to act on climate change in 2012

Paul Simpson of the Carbon Disclosure Project in the Guardian (UK): As the dust settles on the COP17 agreement in Durban, two things are clear. Firstly, that government action to address climate change has not kept up with the pace and scale required to avoid dangerous climate change, therefore significantly increasing risk for society, businesses and the economy at large. Secondly, that although any future agreement may be too late to keep us below the 2C warming previously agreed as the safe target, it is likely that by 2020 all the world's governments, including the emerging markets, will agree a plan to reduce emissions.

This presents long-term investors such as pension funds with a challenging quandary. The slow progress towards action presents additional risks to their portfolio in the medium to long term from increasing frequency and severity of extreme weather events.

The Intergovernmental Panel on Climate Change (IPCC) has long described investors as aggregators of risk from climate change. It can be argued that if governments fail to act sufficiently then investors have to do so in order to protect their assets.

There is another significant risk building up in portfolios – when governments do finally agree a new legally binding climate change deal they will need to ensure that emissions reductions are made fast. This will therefore increase risks, such as stranded assets, to companies who have not transformed their business to decouple emissions from business growth....

The floor of the New York Stock Exchange in 1963