The biggest players in finance are factoring a new type of risk into their decisions — and it's long overdue

pulse

January 1, 2018 7:32 PM

Over 200 firms managing a combined $81.7 trillion have pledged to report climate-related risks.

Over 200 firms have pledged to regularly disclose the risk climate change poses to their business and implement climate-friendly initiatives as part of the Task Force on Climate-Related Financial Disclosures, a group led by Michael Bloomberg and Mark Carney.
The push includes institutional investors, insurance giants, and pension funds, which manage a combined $81.7 trillion.
The financial sector's engagement on climate change comes at a critical time.

The world's largest institutional investors are going green.

Over 200 firms, managing a combined $81.7 trillion

BlackRock, the world's largest asset manager with $6 trillion under management, sent letters earlier this month to 120 companies that it invests in and has identified as exposed to climate risk. The letters urged the companies to report climate data in line with the task force's recommendations.

Shell, one of the companies that received a letter, pledged earlier this month to reduce its net carbon emissions 20% by 2035, and 50% by 2050 below current levels.

Other major financial agencies have jumped on board, too. The World Bank announced that it plans to stop financing "upstream" oil-and-gas projects — that is, those in the exploratory phase — from 2019 on. But the World Bank said it would continue to finance "downstream" projects (those already online) with an emphasis on natural gas in developing countries.

Moody's, one of the largest credit-ratings agencies, has already started factoring climate indicators into its evaluation of coastal states and cities, so it's likely just a matter of time before the agency applies the framework to companies as well.