The Unstoppable Rise of Sustainable Investing
Direct exposure to global warming influences retail investors, while institutional investors divest from high-emission stocks in response to growing awareness of climate change risks
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Climate change is slowly transforming our living environment, but it is not unusual for many people not to take this seriously until they experience it on a personal level. Due to the limited span of attention that everyone possesses, individuals are inclined to concentrate more effectively on infrequent dramatic changes rather than frequent gradual changes.
Therefore, extreme local temperatures, such as the hottest summer on record for Europe and China in 2023, may serve as a “wake-up call” for people to realise the full extent of climate change risks. Consider that Hong Kong recorded its hottest day ever in September 2023, with the temperature exceeding 34 degrees Celsius, and a report from The European Space Agency estimated that temperatures in Italy exceeded 50 degrees Celsius.
In September 2022, more than 500 institutional investors with US$39 trillion in assets under management signed a statement, advocating for governments to implement ambitious policies to combat the climate crisis effectively. EY Global Corporate Reporting Survey 2022 found that 78% of investors prioritise environmental, social, and governance (ESG) initiatives over short-term profits, although only 55% of businesses are willing to align their focus accordingly.
So how do investors react to abnormal local temperatures? Do people’s attention to global warming affect financial markets?
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