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Gemologist: can we adapt to the new climate normal?

Climate change will test our ability to avoid mortal danger more than ever before. Humanity’s ability to adapt, something we have excelled at, must again come to the fore.

Oh a storm is threat’ning

my very life today.

If I don’t get some shelter,

ooh yeah, I’m gonna

fade away

– ‘Gimme Shelter’, by The Rolling Stones, released in 1969

Masters of adaptation

A storm has come. People have sheltered, and continue to do so, at home as a virus that emerged rapidly from Wuhan claims lives across the planet and ravages businesses, economies and social norms.

At this stage of the crisis, the human, social and financial costs of the coronavirus pandemic remain incalculable. It will have both short- and long-term consequences for individuals, families, business, politics and finance globally. But humanity has weathered severe crises before, and is doing so again.

As a species, we are survivors. We adapt.

Climate change: our ultimate challenge? 

However, humanity will have to summon all of its adaptive ingenuity to combat the bigger threat coming our way. A crisis of our own making, climate change, threatens the entire sheltering capacity of the earth itself.

In efforts to deal with a hotter world, we think adaptation deserves equal prominence alongside mitigation in the lexicon of environmental sustainability. It is also a topic deserving of in‑depth research by investment managers with long-term perspectives, and we argue this case in the latest issue of Gemologist.

Recently, we surveyed companies in our global emerging market portfolios to assess their levels of preparedness for a 2°C change in average global temperature and their readiness to adapt to the perils of a warmer planet. This complements our efforts to engage with companies on mitigating climate change in their operations, as well as boosting the quality and extent of their disclosures and actions towards environmental, social and governance matters.

We found only one company which met our full expectations for preparedness. This underscores the need for us, as long-term investors in regions of the world likely to be hit hardest by climate change, to encourage companies to develop adaptation plans and support their efforts to execute them.

We urge all investors to make climate change a core theme of their interactions with businesses: all companies, not only those we invest in, must begin to focus on adapting for the rougher weather ahead.

Our rationale for adaptation, and an exploration of the results of our survey of portfolio companies’ climate-change readiness, can be found in the Q2 2020 issue of Gemologist.

Risk profile

The above does not represent all of the securities held in the portfolio and it should not be assumed that the above securities were or will be profitable. Investments in emerging markets tend to be more volatile than those in mature markets and the value of an investment can move sharply down or up.

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