Of all the sustainability indicators, climate change is arguably the most urgent, not just in terms of impact, but also complexity. It is also the one that raises the greatest degree of uncertainty, which is why, for many investors, climate change is their No. 1 ESG concern. Their concerns are echoed in this year's edition of the World Economic Forum's Global Risks Report, which reveals that for the third consecutive year environmental risks dominate the list — both in terms of impact and likelihood.
One of the key drivers underpinning those concerns is regulation. Today, there are more than 1,500 separate pieces of climate policy or legislation in force around the world. Some impact the companies that investors are invested in while others target the investors themselves. In France, for example, climate change reporting became mandatory for institutional investors in 2015.
The reasons for this raft of regulation were made extremely clear in last year's report from the Intergovernmental Panel on Climate Change. It pointed to the urgent action needed to limit global warming to 1.5 degrees Celsius before 2030 if we are to avoid irreversible and far-reaching damage to the world we live in.