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Climate Investing Moving from Conversation To Action
Commitments by investors to the Task Force on Climate-related Financial Disclosure (TCFD), as well as existing and pending regulation in Europe, are quickly advancing the financial industry's response to climate change.
With evolving climate science and regulation, investors are on a journey when it comes to understanding and responding to climate change.
State Street Global Advisors has developed a suite of capabilities to help clients meet their investment goals specific to climate challenges. These include a spectrum of climate-related investment solutions, from exclusionary and mitigation solutions to those that also incorporate adaptation.
A Growing Need For Climate Action
For decades, experts have warned that the physical, economic, and regulatory risks posed by climate change could mean significant losses for investors. Consequently, investors have been debating how to interpret and measure climate risk in their portfolios and what actions can help safeguard investment from a risk and return perspective.
Certain key developments helped shift the climate conversation from debate to action and have created a new sense of urgency among investors. They include:
Clear manifestation of the physical impacts of climate change. As extreme weather events have become more frequent, the physical impacts of climate change have become more visible and obvious. In Australia, for example, it is predicted that the impacts of prolonged drought on the agriculture sector caused by changing climate patterns over the last few years may reduce Australia's GDP by a full percentage point over a two-year period.1
Quantification of economic risk. In November 2018, a report published by 13 United States government agencies drew widespread attention. It warned that without significant steps to address global warming, annual losses in some economic sectors could reach hundreds of billions of dollars by 2100.2
Climate regulation. Overhaul of the European legislative framework directly impacts investors as Europe begins to operationalize the Paris Climate Agreement.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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