Nearly a half (48%) of respondents to an MSCI survey say that the prices of financial assets do not reflect climate risks, compared with 41% who believe financial assets partially reflect such risks, and 7% who think prices capture climate risks fully.
Yet, climate change has some impact on investment decisions, with just over one-third (34%) of respondents say that climate change has had a major impact on the allocation of assets in their portfolio, but more (42%) say it has had a moderate impact.
But only 5% of respondents indicated that climate change has had a major effect on their asset allocation, far outweighed by the 17% that indicated climate change has had no effect so far.
On the other hand, more than two-thirds (67%) of respondents expect oil companies to underperform the market as a whole over the next 10 years because of climate transition risk, while a majority (56%) expect companies in the aviation industry and half of firms in industrials to underperform because of transition risk as well.
For its Climate Risk Survey, MSCI Sustainability asked over 350 senior investors and risk managers across banks, insurers and investment institutions for their views about the effects of climate change on investments. More than one-fourth of respondents are based in Asia Pacific (Apac).
Released ahead of the 29th session of the Conference of the Parties to the United Nations (COP29), the study provides a snapshot of how participants across financial markets perceive the pace of transition to a low-carbon economy and the scale of physical impacts of a warming world.
There is a “divergence on emissions”, with roughly half of respondents expecting that emissions would peak within the coming decade while the other half expect emissions to rise indefinitely, according to the survey – although anecdotally engagement on energy transition is particularly high on the agenda in conversations between companies and investors in Asia.
Moreover, a majority (57%) of respondents agree broadly that climate-related physical risks are creating economic fallout and growing in severity sooner than current climate scenarios anticipate, with an additional 36% of respondents expecting climate change to have a significant economic impact in the future.
Indeed, Apac and European respondents are more likely to expect extreme impacts, with 43-46% believing in the possibility of economic collapse. Regions particularly prone to heat stress, such as North America, the Middle East and parts of Apac, report higher levels of concern about heatwaves.
Climate migrants
Finally, survey respondents largely agree on the origin and destination regions of likely migration flows. A plurality (42%) of respondents say that moderate to high levels of global warming could trigger both environmental and geopolitical tipping points, with those in Europe and Asia expecting more severe impacts than in North America.
A strong consensus has emerged that climate risks will significantly affect migration patterns over the next decade. Respondents overwhelmingly expect people to leave vulnerable regions such as South Asia and the Pacific Islands. North America, Europe, and Australia/New Zealand would be expected to receive the largest numbers of people fleeing their countries because of climate change.
