Investors could see asset value losses of 50% or more unless they up their game turning net-zero commitments into action, according to a research report from Willis Towers Watson's Thinking Ahead Institute released Thursday.
"The investment industry is not acting swiftly and definitively enough on its net-zero commitments. As an industry we are not seeing the bold decisions needed, the infrastructure built to secure success, or the investing required today," the institute said in its research report, Pay Now or Pay Later?.
Before 2100, existing financial assets could drop 50% to 60% in value if global temperatures run between 2.7 and 3.7 degrees Celsius, the current "business-as-usual" path, the research report said.
Under a scenario that keeps global warming below 2 degrees, asset value losses would be 15%, the WTW report said.
According to the United Nation's Intergovernmental Panel on Climate Change, reaching the Paris Agreement goal of limiting global warming to around 1.5 degrees Celsius would mean global greenhouse gas emissions would need to peak before 2025 at the latest.
Tim Hodgson, co-head of the Thinking Ahead Institute, said in a release on the report that the findings "should help investors understand that without significant efforts now to transition to a sustainable economic model, the associated physical risks driven by continuing emissions and climate change will potentially lead to major changes in global GDP and income levels in the coming century."
A faster and better coordinated transition could partly help offset asset value losses with investment in new energy infrastructure, the report said, and after initial drawdown, providers of the financial capital could expect to see future returns, as well as other economic benefits.
Governments will have to fully implement climate targets but the investment industry must also recognize "that we are part of the economic system that can and must address it," the report said.
"Climate time frames now overlap with investment time frames. Not acting might appear the cheaper option in the short term, but over a horizon that is completely normal for investment funds, inaction is in fact the far more expensive choice," said Isabella Martin, senior associate at the Thinking Ahead Institute, in the release.
