Low oil price reveals implications of carbon risk

Abstract

A significant proportion of the world’s investment assets lie with companies whose business activities produce large emissions of carbon dioxide. In the future, climate policy emissions restrictions will affect these companies’ ability to operate, which could lower their value. The consequence could be a substantial risk for investors who do not make timely provision against this ‘carbon risk’. The fact that the carbon risk is hidden within investors’ investment portfolios will simply serve to undermine confidence between market actors.