The EDHEC-Risk Climate Impact Institute has published a new study titled ‘How Does Climate Risk Affect Global Equity Valuations?’, warning that climate change could significantly destabilise the value of stocks. The study infers that a restriction of global warming to 2 degrees may see a decrease in stock prices of under 10%. Conversely, if little to no action is undertaken to prevent climate change, there is a potential for global valuations to plunge by more than 40%.
The study further warns of a climate tipping point – a critical temperature boundary at which minor changes can induce rapid and often irreversible changes in the climate system. Should this tipping point be reached, losses could surpass 50%. The study emphasises that their predictions are cautious, rather than sensationalist, thus highlighting that climate change is not solely an environmental concern but a looming financial catastrophe.