As the realities of climate change become increasingly apparent, it is inevitable that governments will be forced to act more decisively than they have so far. The escalating human and economic costs of climate disasters mean policy risks are rising.
The question for investors is not if governments will act, but when they will do so, what policies they will use and where the impact will be felt. The UN-PRI Inevitable Policy Response Project forecasts a response by 2025 that is likely to be forceful, abrupt, and disorderly because of the delay.
There are few signals that governments will act forcefully on climate change in the next 2 years. But this situation is not sustainable – and 2023-25 is the critical period.