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Analysis: A palpable fear of climate risk

climate
By Paul Mackintosh   
October 11, 2023

If there is one word to describe the impression from this year’s Building Bridges, Geneva's annual summit on sustainable finance, it’s probably fear.

Not that there were signs of any die-off in interest in sustainable finance, or any retreat from environmental, social and governance and sustainable propositions, among the financial and asset management community at the four days of events last week. Sessions were packed. Specialist panels, like on green financial technology, were standing room only. Attendance remained high through the four days.

As Patrick Odier, chair of Building Bridges and chairman of the supervisory board of Lombard Odier Group, said in his opening remarks, “sustainability issues are becoming a key part of financial decision making”. The attendance proved his point.

The fear was mostly manifested as risk assessment. It’s not that the attending investors were blind to the continuing opportunities of sustainable finance and the potential upside from participating in burgeoning sectors like clean energy. It's just that they had more immediate concerns - like the survival of human civilisation and the human race.

Financial professionals, unlike politicians, don't have the luxury of ignoring reality. This especially applies to their fiduciary duty to analyse long-term risk. There’s no doubt who were the most concerned at the summit. Banks, asset managers and asset owners were the largest group, accounting for 34% of the 2,300-plus attendees from 63 countries. International organisations and NGOs were only some 18% and representatives of governments were only 5.7%.

Nature is one suddenly relevant theme, with the launch of the Taskforce on Nature-Related Financial Disclosures for financial institutions “to incorporate nature-related risks and opportunities into their strategic planning, risk management and asset allocation decisions”. But again, the stress is on survival rather than conservation, with the risk that damage to nature poses to agriculture, livelihoods, and the planet as a whole.

Odier described the purpose of Building Bridges as to try to “increase the speed of transformation of our economic models”.

With continuing high temperatures across Europe, and the British Isles hit by flooding and warnings of weather danger to life at the time of writing, it can’t come fast enough, not with the Grim Reaper breathing down our necks.