Investors should be proactive and think about how to adapt their portfolios to the climate change challenge … and opportunity.

Climate change—by which we mean the increasing occurrence of extreme weather events such as freak storms, all-engulfing floods, or debilitating droughts—has been affecting the lives of a growing number of people. Witness Houston, Texas, which endured three massively damaging floods over the span of 2015, 2016, and 2017, each of which was rated a 1-in-500-year event.

In 2018, 415 asset managers, together overseeing assets totaling $32T, signed an open letter to governments urging more action on climate change, which they say threatens their holdings.

The World Economic Forum (WEF), in its Global Risks Report 2019, noted that climate change, already a major concern in 2018, had moved up a notch in its ranking of the most pressing risks. A survey of the WEF’s stakeholder-respondents, made up of insurance and reinsurance companies, banks, and industry-based focus groups, revealed the top three global risks are related to climate change.

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