Climate Change: The Cause of Another Great Recession?

by Joshua Dorman

Hedge fund managers and investors are becoming increasingly worried about a possible second Great Recession caused not by mortgage-backed securities or the fall of major banks, but by an event seemingly unrelated to finance: global climate change. Katy Lederer (2016) attended the seventh annual Investor Summit on Climate Risk last year, a convention designed to tackle the issue of financing the transition to renewable energy that was established at the Paris Climate Talks and discusses the hypothetical effects of a prolonged shift away from fossil-fuel investments. At the summit, approximately five hundred financial professionals with a net sum of twenty-two trillion dollars under management convened in New York City to address this growing threat to the world economy. Under the façade of thousand dollar suits, diamond-studded cufflinks, and wine-and-cheese Hors d’oeuvres, the collective outlook was not an optimistic one. One analogy was repeatedly mentioned: the economic impact of remaining invested in fossil fuels was likened to the collapse of the economy when the housing bubble burst in 2008. Continue reading