Between +2C and +3C life becomes increasingly difficult to sustain and civilisation strains at its seams. The end is inevitable, we face the challenge of working out how to lead a good life in a crumbling ecology.
Can financial planning help people define and plan a meaningful life in such a scenario? Maybe. But I don’t want to do the job.
So that leaves us with future scenarios worth planning for, that are well below +2C, which happens to be the agreed future of the global economy if you believe the word of politicians.
This is the realm of adaptation and mitigation. This is something that financial planning can help with. To help us avoid the hottest scenarios, and to consider the various risks we face even in the most optimistic of future scenarios.
But is financial planning up to the task? Not in its current form.
Currently we look back at the past and based on past patterns, we make assumptions about the future that do not take account of climate breakdown.
We simultaneously tell our clients that if they invest more into a portfolio of investments that is funding HSBC, Barclays, Exxon, and BP then they will lead long, happy and prosperous lives, even as we undermine their future.
We need a set of assumptions about the future that takes account of climate science.
Then we need to think about the risks that our clients will be exposed to. These risks will be physical, transition and zeitgeist risks.
We need to have conversations about the limits of financial planning – there is no point to financial planning in a hot house world. And we need to start pricing in the cost of transition and adaptation to our clients' financial plans.
Finally, having used forward-looking assumptions that take account of climate risk, discussed the risks ahead and which ones can be mitigated, or adapted to, and factored in the cost of mitigation and adaptation, we should recommend investment solutions that align with a survivable future.
In other words, if it is not OK for a client to live in a world hotter than +2C, then it should not be OK to invest for a world hotter than +2C.
If we can follow these simple principles, then maybe we can create a new sustainable financial planning model.
Sebastian Elwell is director of Switchfoot Wealth
