In October 2024, Spain suffered its costliest climate-related natural disaster on record, when severe floods swept through the Valencia region. More than 150 people lost their lives, and many more were injured or displaced [1]. The economic cost reached 17 billion euros — about 1.7% of Spain’s GDP. Just a few months later, in January 2025, Los Angeles faced the deadliest and most expensive wildfires in history. The fires claimed 27 lives, displaced thousands, and caused an estimated 250 billion dollars in damages – the equivalent of 5% of California’s GDP [2], wiped out in only eight days.
The physical risks of climate change are becoming increasingly alarming - economically, socially and environmentally.
Recent studies on various climate scenarios suggest that a “business-as-usual” +4°C outcome - where global temperatures rise by 4°C or more - could cut up to 40% of global GDP [3] . This is far worse than earlier estimates of around 10%. This estimate includes the impact of disruptions to global trade and strained economic relations between countries. For comparison, the Covid-19 pandemic caused a global GDP decline of just 3% [4] . The contrast illustrates the scale of the threat.
There is now little doubt on the fact that we are off track in meeting the Paris Agreement’s target of limiting global warming to 1.5°C. The year 2024 underscored this gap: COP29 delivered disappointing outcomes, and shifts in US environmental policy – including withdrawal from the Paris Agreement - have raised concerns. These setbacks will carry far-reaching consequences for our economies and societies.
But this is not the time to scale back climate action.
At Candriam, we take part in the fight against climate change both because it is our duty as a responsible investor, and because we have the conviction that it is the best way to protect our clients’ interests over the long term. For fifteen years, climate change mitigation and adaptation have been embedded in our ESG analysis across our sustainable investment strategies. Our approach is based on four complementary pillars:
In 2021, we committed to achieving “net zero” across our activities by 2050, and joined the Net Zero Asset Manager Initiative, alongside 300 other asset managers worldwide.
We set climate objectives along four pillars: engagement, reduction of emissions, alignment of our investments with net zero, and financing the ecological transition.
We report annually on our progress. Below is a snapshot of where we stood at the end of 2024.
We are getting closer to our 2030 goal of 50%, but two challenges remain:
Our framework evaluates companies on whether their climate targets, governance and capital allocation are consistent with sector-specific decarbonisation pathways.
There is little doubt on the fact that the transition will be delayed compared to a Paris-aligned pathway. But it is far from derailed. Integrating physical climate risks is complex – it requires new datasets, sophisticated models and scenario-based approaches to translate physical risks into financial impacts.
Complexity, however, must never become an excuse for inaction. On the contrary, it is a driver of innovation.
At Candriam, our responsibility is to stay true to our conviction, maintain a long-term perspective, and honour the trust our clients place in us.
[1] Source: World Meteorological Organization, European State of the Climate – Report 2024
[2] Source: AccuWeather, https://www.accuweather.com/en/weather-news/accuweather-estimates-more-than-250-billion-in-damages-and-economic-loss-from-la-wildfires/1733821
[3] Source: IOP Science, Reconsidering the macroeconomic damage of severe warming - IOPscience
[4] Source: Science Direct, Dramatically higher loss of GDP under 4°C warming
[5] Scope 3 emissions are the category of greenhouse gas emissions originating from companies’ value chains, including suppliers, transportation, product usage and disposal.
[6] A company is called “net zero” if it has committed to achieving net zero emissions by balancing the amount of greenhouse gases emitted with those removed. This can be achieved by cutting emissions as closely as possible to zero and then removing any remaining emissions through natural carbon sinks (forests or carbon-capture technologies). Being “Paris-aligned” means that the company has adhered to a carbon budget or pathway that is consistent with the goals of the Paris Agreement – i.e. keeping their cumulative emissions over time within this carbon budget. While both aims are important, Paris alignment often requires companies to develop detailed transition plans that show immediate reductions in emissions and priorities in capital spending over the near and medium term, as it focuses on cumulative emissions rather than future promises. (Source: MSCI Institute)
[7] The EU Taxonomy is a classification system that defines which economic activities can be considered environmentally sustainable.
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