Climate change is an unfortunate reality that is going to reshape many parts of our world — and investing is likely no exception. According to a recent study by the International Finance Corporation (IFC), “effects on returns from climate change are inevitable,” with — perhaps unsurprisingly — “the energy sector most significantly impacted.”

As a citizen of a warming world as well as an investor planning for your own financial future, the question arises of how you can invest responsibly in light of and as a result of climate change, and whether any portfolio adjustments are necessary going forward. Here’s a look at how climate change is shifting things in the world of investment and what’s predicted for the future.

How is climate change impacting the investment landscape?

According to a report by McKinsey, “climate-related investment increased significantly in 2022, defying the considerable geopolitical and macroeconomic headwinds that roiled most global capital markets.” More specifically, it reported that “climate-related private-market investment far outpaced the broader market in 2022 as measured by deal activity, the amount of capital deployed, and capital flows into dedicated funds.” Between just 2019 and 2022, for instance, over 330 sustainability, environmental, social, and governance (ESG), and impact funds were launched by private-market equity investors, says McKinsey.

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And it predicted that momentum would continue to pick up speed going forward, in light of the continued introduction of climate technologies and nations’ efforts to curb emissions and expedite plans for more renewables. Still, McKinsey contended that “much more remains to be done to scale up climate investing.”

What future trends are predicted to emerge as a result of climate change?

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