Sustainable Investing: How Effective Is It Really?

In honor of Earth Day on April 22, Columbia Climate School has a variety of great events and stories lined up for you. Learn more on our Earth Day website.

Photo: Pictures of Money

In October, a report released by the White House warned that “Climate change is an emerging threat to the financial stability of the United States.”

The intensifying impacts of climate change can jeopardize businesses in numerous ways. Extreme weather events disrupt operations, make resources such as water or energy scarce or more expensive, and increase the cost of insurance, posing financial risks for those who invest in companies unprepared to deal with these impacts. Other attendant climate, environmental, and social impacts also have financial repercussions. The loss of biodiversity and ecosystem services could cost the global economy $2.7 trillion by 2030 according to the World Bank. Sea level rise threatens real estate and coastal infrastructure. Increasing water scarcity around the world — a McKinsey study  estimated that global water demand will exceed the available supply by 40 percent by 2030 — may disrupt supply chains and business operations. New regulations that drive a shift away from fossil fuels could introduce uncertainty into business decisions. And companies’ reputations may suffer as investors increasingly favor more sustainable companies.

So is it less risky to invest with sustainability in mind? And does sustainable investing actually help the planet?

What is sustainable investing?

Security and Exchange Commission chairman Gary Gensler said that investors with over $130 trillion in assets under management have been asking for companies to reveal their climate risks. More and more investors, especially younger ones, want to invest in companies that take climate risks into consideration, and that are…

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