Weathering the Storm: Exploring Climate Change Adaptation and the Investor’s Imperative

The Franklin Templeton Fixed Income team believe that issuers that think critically about the environment in which they operate could outperform throughout the full market cycle compared with those who are slower to adapt.

The Franklin Templeton Fixed Income team has long been aware of the need to fight the effects of climate change and we know that it is crucial not to be complacent. We must help protect communities from the increasingly extreme weather events, such as fires, floods and droughts, that we have seen of late and to check the seeming inexorable rise of sea levels, all of which threaten to wreak havoc on the global ecosystem.

In 1998, the Intergovernmental Panel on Climate Change (IPCC), an intergovernmental organization endorsed by the United Nations, was created to provide policymakers with regular scientific assessments on climate change, its implications and potential future risks, as well as to put forward adaptation and mitigation options. The IPCC recently released its sixth assessment report, summarizing the current state of knowledge on climate change.

The summary comprises multiple studies that show unequivocally that widespread and rapid changes in the atmosphere, ocean, cryosphere and biosphere have already occurred in every region across the globe. Unless we change not only our way of thinking but also our actions, the effects of climate change can only get worse.

It is therefore evident that climate-change adaptation should be a key focus alongside climate-change mitigation, and it is our view that those in the finance sector have an important role to play in the years and months ahead.

The IPCC’s report stresses that many adaptation options that are currently feasible and would be effective today will likely become more constrained as global warming intensifies. If this is true, we have no time to waste.