SINGAPORE (Apr 22): Most investors have traditionally focused on ensuring their portfolios generated the maximum amount of returns on their capital. But attitudes, especially among institutional investors, are changing. The focus now is on mitigating risk rather than maximising returns. French investment manager Amundi Asset Management puts it down to a combination of stricter regulations everywhere and the inability to bear significant losses — particularly in the case of pension funds — a legacy of the global financial crisis and European sovereign debt crisis.
And the risks that are apparently top of mind for institutional investors are those in relation to climate change. In the World Economic Forum’s annual Global Risks Perception Survey, respondents were most concerned about the impact of extreme weather events, natural disasters and the failure of climate-change mitigation and adaption.
To be sure, the impact of climate change on businesses has been well documented. The main costs of extreme weather events is the damage wrought to physical infrastructure such as roads, ports and factories, which in turn disrupts business operations and supply chains. What’s more, businesses located in particularly vulnerable areas, such as on the coastal areas where most development is anyway, run the risk of being uninsurable. That in turn raises the question of whether they are viable at all.