Sell-side economists expect inflationary impact from climate change – Schroders survey

Funds house sent survey to investment banks late last year

Economists at investment banks surveyed by UK asset management house Schroders reckon climate change will likely prove inflationary.

The £294.8bn (€380.8bn) funds firm sent a survey to 18 investment banks and brokerage firms in December 2015 and got five responses.

“The results supported our own analysis that climate change represents a significant threat and will likely be inflationary, while short-termism hampers mitigation efforts,” the fund firm said.

It follows the firm’s ‘The impact of climate change on the global economy’ publication and it says it sought to extend its analysis on climate change. It said the response rate to the questions within the survey was generally high, aside from the optional questions concerning climate change impacts on asset prices and methods to reduce greenhouse gas emissions. For these questions, the response rate was 60%.

The research note was written by Keith Wade, Schroders’ Chief Economist & Strategist and his colleague Marcus Jennings.Schroders said the research suggests that the economics community in investment banking and broking “is yet to fully focus on the impact of climate change”.

“Furthermore, even among those who did respond, some did not incorporate climate change into their forecasting process. Uncertainty about the overall effects and the long time horizons involved were cited as reasons for the lack of inclusion, rather than denying there would be any effect.

“Nonetheless, this is surprising given the significant amounts of capital tied up in sectors such as energy and insurance (which will be affected) and the increase in investor awareness of the issue.”

Last month, RI reported that Richard Stathers, the firm’s Head of Responsible Investment, was leaving the company. Elsewhere, the Financial Times has reported that Schroders is “poised” to announced that CEO Michael Dobson is stepping down to be succeeded by investment head Peter Harrison. The company declined to comment to the FT.