Since its popularization in the 1960s, passive investing has become the primary strategy for private and institutional investors worldwide. Many have abandoned active stock picking due to the challenge of consistently outperforming the market and the high costs associated with active management. Passive investing offers reduced risks and fees, diversification benefits, and attractive long-term returns. However, it has drawbacks. Passive investors, who construct their portfolios to track benchmark indexes like the S&P 500 or NIFTY 500, often neglect risks and opportunities such as climate change. This oversight can lead financial markets toward a state of autopilot, ignoring significant environmental concerns.
India’s housing sector stands at a pivotal crossroads for climate action. Accounting for over 20% of the nation’s greenhouse gas emissions, primarily from electricity use, industry faces escalating demands exacerbated by urbanization and rising temperatures. Despite the apparent environmental imperative, scaling green housing remains challenging. High upfront costs deter widespread adoption, compounded by limited financial incentives and loan accessibility. Yet, the potential benefits—lower energy bills, enhanced asset value, and reduced carbon footprints—underscore green housing’s viability. With strategic policy interventions and financial sector alignment, India can harness this opportunity to catalyze a sustainable housing revolution, driving economic growth and environmental stewardship.
Climate change, now a major financial concern, impacts investment and lending decisions through physical and transition risks. Banks face significant physical risks affecting their assets and loan portfolios, while institutional investors and insurance companies must manage both risk types. Equity investors should prioritize transition risks due to potential policy changes. Ignoring climate risks is not viable; investors must integrate climate considerations to safeguard portfolios and drive positive change in business practices.
Blog Following up on our last blog – Ways to de-risk Climate Finance – one of the common discussion themes that takes centre stage is ‘Leveraging Public Finance,’ and almost […]