This report analyzes in some detail therisks to project finance and the performance of real-sectorinvestments. Options, futures, derivatives, foreign exchangeand more exotic instruments are not specifically addressed.The objectives of institutional investors, such as pensionfunds, include creation of sustained revenues over a longperiod of time. Clearly, given this long-term perspective,institutional investors need to be particularly aware ofgrowing risks to their investments in climatically sensitivesectors or regions. This report demonstrates that climatechange and its impacts are likely to alter a number ofconditions that are material to the objectives of financialinstitutions. If changing conditions are not activelymanaged, investments and institutions may underperform. Mostinvestments will be channeled through financialinstitutions. Given that the main effects of climate changeare now well established, there is a considerableopportunity, as well as a responsibility, for theseinstitutions to take a leading role in adaptation to climatechange. Institutions managing investments in long-livedassets have both a direct financial risk to consider and theopportunity to create value by working proactively withtheir clients and other stakeholders to take steps to managethe risks. Going forward, International Finance Corporation(IFC) will initiate the development of more general toolsaddressing climate risks and investments.
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