Physical climate risks pose the greatest threat to institutional investment portfolios, while differences in sectoral exposures to transition risks are widening, according to updated scenarios released by Ortec Finance. The Netherlands-based risk management solutions provider said physical risk as a result of rising temperatures and greenhouse gas emissions is the most serious threat to asset performance and the stability of the financial system. “The medium to long-term impact of physical risk is far more pronounced in the scenarios that incorporate last year’s 0.2°C temperature spike and simulate the outcomes of the world’s current climate policies,” the firm said. Ortec Finance has released 2025 updates to its seven proprietary climate scenarios, developed with Cambridge Econometrics, which aim to assess a range of temperature pathways by 2100 and their systemic macroeconomic and financial market outcomes. Under its high warming scenarios, equity asset performance in the UK and US is anticipated to decline sharply in the 2030s due to an emerging insurance crisis, driven by the manifestation and increasing awareness of physical risks associated with rising temperatures. The updated scenarios also reflect faster uptake and lower pricing of clean energy than expected with investment returns from low-carbon and renewable energy technologies viewed as more resilient across all successful low-carbon transition scenarios. “The gap in projected equity returns because of different sector exposures to transition risk has never been more pronounced and creates opportunities for investors to realign portfolios to mitigate any fallout from the transition,” the firm said.  

The US Securities and Exchange Commission (SEC) has approved an application to launch the country’s first stock market dedicated to the sustainability economy in 2026. “Today’s approval order is an important step forward for sustainability-minded investors and companies,” said Green Impact Exchange (GIX) CEO and Co-founder Dan Labovitz. “We are grateful to the SEC commissioners and staff for their thoughtful engagement throughout the application process, and their support for market-driven innovations that will improve capital formation.” As a listings and trading venue, GIX will serve public companies and investors looking to manage sustainability-related risks and capitalise on opportunities to provide sustainable solutions. It will be powered by exchange operator MEMX. “Climate risk is business risk. It’s that simple,” said GIX President and Co-founder Charles Dolan. “US investors and companies are continuing to pursue sustainability because it makes financial and competitive sense. Public markets like GIX have a pivotal role to play in connecting sustainable investors with companies that understand that.” 

Extreme weather caused by climate change could wreak US$38 trillion of damage on food sector value chains and infrastructure, according to a new report by the First Sentier MUFG Sustainable Investment Institute. Significantly increasing climate risks and extreme weather hazards demonstrate the need for businesses and investors to take action to support food security, food system resilience, and commercial returns, the report said. Global food systems must meet demand rising at a compound annual growth rate of 1.26% over the next decade. But they face a higher likelihood of insecurity and commercial losses, due partly to the rising complexity and cost of production. Six key hazards – temperature extremes, heavy precipitation, flooding, droughts, extreme storms, and compound events – have the potential to reduce agricultural yields by up to 20% in a 2.5oC global warming by 2050 scenario, the report’s base case. Institute Director Sudip Hazra said investor decision-making and engagement strategies in agricultural and food system companies needed to take account of these risks. “Investors can play a critical role in de-risking agricultural businesses from the escalating climate impacts by supporting their companies to consider and disclose the areas relating to best practice across a holistic reporting framework,” he said. “This can include value chain maps outlining core partners and regions, relevant physical climate impacts, related risks and opportunities, and efforts to ensure business resilience.” 

Members of the Net Zero Banking Alliance (NZBA) have voted overwhelmingly in favour of adopting changes to the framework, following a mass exodus of banks from the alliance earlier this year. The strategic review, which has reportedly been underway for a year, has introduced more pragmatism to the framework, allowing banks more agency to achieve their individual climate targets. The renewed guidance aims to recognise that many members are subject to “significant new external climate reporting requirements” and that there is a “wider range” of net zero pathways that alignment with the goals of the Paris Agreement, rather than just a 1.5°C pathway. This latter change follows concerns that the NZBA would be dropping the alliance’s 1.5°C target altogether. “We are halfway through the critical decade for action of climate, and we need all sectors, including banking and finance, to commit to moving the needle on emissions reductions,” said Shargiil Bashir, NZBA Chair and Chief Sustainability Officer at First Abu Dhabi Bank. “As the largest global initiative specifically focused on supporting climate mitigation action by banks, NZBA is uniquely positioned to provide practical support to banks navigating the net zero transition.” NGO Reclaim Finance said the alliance had taken “a giant leap backwards”. Director Lucie Pinson added: “We expect each NZBA member bank to declare its own position. If they fail to reaffirm their commitment to 1.5°C, their stakeholders, including supervisors, investors and the public, will know that the banks cannot be expected to reduce climate risks but will continue driving the world toward climate disaster.”  Following recent departures, the NZBA has 129 members across 44 countries with US$47 trillion in combined assets.