NATURE RISK, FINANCIAL RISK

The institutions that lead will be those willing to move beyond silos, align capital with planetary boundaries, and invest not only in markets, but also in the systems that support them

- Julie McCarthy & Patrick Odier

On 26 December, 2004, a massive undersea earthquake triggered a tsunami that left 230,000 people across Southeast Asia dead. Almost everyone, both human and animal, was caught off guard, with a notable exception: elephants. In places like Thailand and Sri Lanka, elephants became agitated hours before the waves hit. Wild elephants fled to higher ground, and captive ones defied their handlers, sometimes with tourists still on their backs. Sensing low-frequency vibrations undetectable to most species, they acted on early warning signals — and were far more likely to survive.

Today, another, far larger disaster is brewing, as rapid planetary warming and escalating environmental degradation threaten every sector of the global economy. And while many investors continue with business as usual, as if unaware of what is coming, one group is attempting to get out of harm’s way: long-term asset owners, such as pension funds and sovereign wealth managers.

These investors, unlike hedge funds or private equity firms, take a generational view of the assets they manage. They cannot afford to ignore the inextricable link between global financial stability and environmental stability, an awareness reflected in new initiatives like the Debt Suspension Clause Alliance and the Global Hub for Debt Swaps for Development. While some claim that accounting for climate change amounts to “mission creep” for global financial stewards like the International Monetary Fund, bellwether investors recognise that nature and climate risks will materialise in nearand medium-term shocks, affecting every facet of the global economy.