According to findings from a study conducted by the EDHEC Infrastructure and Private Assets Research Institute, some investors could see the value of their portfolios drop by more than 50% by 2050 due to climate risks. This article from The Conversation explores how climate change poses physical and transition risks for infrastructure assets, such as roads, bridges, ports, airports, and power plants, that can affect their value and performance.
The study revealed that poorly diversified portfolios with high exposure to specific sectors and regions increase the concentration of risk and potential losses. The study also found that some sectors, such as transport, are more vulnerable to climate risks than others, such as renewable energy. Moreover, investors in developed countries are the most exposed to losses in value worldwide. The article reiterates the arguments from the study that if stakeholders implement an effective transition to a low-carbon economy, the losses due to climate risks could be halved for all investors—a call to action for governments, industry, and consumers.