Keeping up with climate change in setting long-term asset class views

Amundi
By June 22, 2022 07:23

Keeping up with climate change in setting long-term asset class views

Today climate change is arguably the most critical long-term challenge that humanity is facing. “Climate action failure” is not only the top longterm threat in the World Economic Forum’s Global Risks Report for 2022, but is also a key element for investors to factor in when building long-term assumptions on the economy and markets. Dealing with the changes driven by the energy transition is not about mere minor adjustments on some macroeconomic variables. It requires a complete rethinking of asset class returns forecasting and brings major implications for investors1 . In order to make the world less energy intensive and more climate efficient, policy makers will have to channel funds to the right investments. While on the one hand a targeted taxation policy could increase the cost of fossil fuels, a huge public and private investment effort is also necessary to support the transition. That is why central banks in particular will play a key role, for example through green quantitative easing and other non-conventional policies. This is a key element that needs to be factored in when forecasting long-term interest rates.

Amundi
By June 22, 2022 07:23

SEARCH