Investors are bracing for the costs of severe weather events and other climate-driven physical risks while expressing hope that adaptation can stave off the costliest effects of a warming world.
That’s according to a survey last year by the MSCI Sustainability Institute and MSCI’s Climate Risk Center asking more than 350 institutional investors for their views on the effects of climate change on investments. We supplemented the survey with panels and interviews of more than 30 experts from across finance, policy and academia to test and validate how the responses inform a climate scenario that reflects market expectations.
The 10 charts below show the top takeaways from our survey. You can download the full results here.
1. Consensus on impact
Investors say that extreme weather events, driven by climate change, will cause significant damage to the economy —outweighing any potential stimulus from reconstruction efforts.
Will the economy will be impacted by extreme weather (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
2. Hoping for the best
While many investors believe positively in humanity’s ability to adapt to the effects of climate change, significant portions of the market are preparing for a future where adaptation may fall short.
Can we avoid the costliest impacts of climate change through adaptation? (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
3. Top investor concerns
Flooding ranks as the top concern, with a plurality of investors viewing it as the most significant risk. Heatwaves, drought and wildfires also feature prominently among the effects of a warming world that concern investors.
The climate-related physical risks keeping investors up at night (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
4. A marked split on emissions…
Roughly half of investors said they expect that emissions would peak within the coming decade while the other half say they expect emissions to rise indefinitely.
When will global emissions peak (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
5. … and on peak oil
Nearly one-third (30%) of investors said that oil consumption will peak in the next 10 years, while just over one-third (33%) say they expect consumption of oil to increase indefinitely.
When will oil demand peak? (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
6. Broad agreement on warming
Investors we surveyed, along with climate scientists surveyed by The Guardian newspaper, expect, on average, that global temperatures will rise by an average of 2.8°C (5.04°F) above preindustrial levels this century.
Most likely global temperature increase by 2100 (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
7. Expecting uneven progress
Investors question whether China, the U.S. and India—the world’s largest emitters—will fulfill their climate commitments, but have greater confidence in governments in Europe, Japan and Canada.
How likely are governments to meet their climate commitments? (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
8. Anticipating migration
Investors overwhelmingly said they expect people to leave vulnerable regions such as the Middle East and North Africa, Sub-Saharan Africa, and South Asia and the Pacific Islands amid heightened environmental threats, and that wealthier, more resilient regions will serve as destinations for those fleeing environmental challenges.
Likelihood of climate-driven migration by region (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
9. Climate risks mispriced
Only a small minority of investors said that asset prices fully account for climate risks. A plurality (48%) said these risks are not reflected in asset prices, while 41% said they are only partially priced in.
Do asset prices reflect climate risks? (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
10. Doubts on net-zero
A significant majority of investors said that it’s either somewhat or highly unlikely that the global economy will reach net-zero emissions by 2050.
Likelihood of achieving net-zero by 2050 (% of respondents)
Source: “What the Market Thinks: A Climate Risk Survey,” MSCI Sustainability Institute, October 2024
