Climatic tipping points are critical thresholds that determine how the Earth’s system functions as whole. Once reached, these tipping points cause positive feedback loops which can lead to uncontrollable increases in carbon emissions and global temperatures, while exacerbating physical climate risks, resulting in potentially catastrophic global consequences. This short report highlights a number of potential climate tipping points and how they interact, including changes ocean circulation and the melting of ice sheets, but focuses on deforestation within the Amazon rainforest as a critical tipping point.
The increased uncertainty and economic costs related to climatic tipping points will have significant detrimental impacts on economies and societies globally and poses a systematic risk to investors’ portfolios. Institutional investors should be aware of the risks posed by climatic tipping points, particularly when assessing their portfolios for climate-related risks. It is also important for institutional investors to tackle deforestation and prevent dangerous climatic tipping points from being reached by actively engaging with investee companies. Investors can learn more about the PRI’s work on sustainable land use to understand how to engage with companies on deforestation.
The risks of these climatic tipping points being reached increases dramatically beyond 2°C, emphasising the urgent need for climate policy to meet the Paris Agreement’s target of keeping global average temperatures to well below 2°C. A rapid and forceful policy response and a disruptive transition to a low-carbon economy will have significant implications for institutional investors. Find out more about the PRI’s work on the inevitable policy response and how institutional investors can take action to build resilience across their investment portfolios to such a policy response.
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