My New Year’s resolution is to increase my advocacy of green investment. Let me also immediately declare an interest, in that Industry Funds Management (IFM) has been a long-term investor in green energy through its ownership of Pacific Hydro, which is a leading developer and operator of wind power and run-of-river hydro in four countries.

I am a director of Pacific Hydro. Does that declaration tarnish my advocacy? Well maybe, but in reality, advocacy is not driven by the economic interest. Rather, the reverse is true – the economic interest of IFM on behalf of its investors is driven by the facts, the most important of which is the accelerating level of greenhouse gases in the atmosphere, closely correlated with the burning of fossil fuels to accommodate burgeoning global economic growth.

Most sophisticated investors, including most super fund trustees, are well aware of the main scientific arguments, and few would doubt that, ultimately, the world will react in a very forceful way to diminish carbon emissions; yet very few investors or advisers have factored into their risk/reward strategies the ultimate cost of exposure to carbon, in portfolio value terms.

Perhaps there is a general belief that when the carbon price is fully established on a global basis at $60 per tonne or more – the figure currently required for a market-based solution to carbon substitution, and a figure which rises the longer the delay in implementation – it will affect companies and investment portfolios universally so that in comparative terms any one fund will look okay.

But superannuation trustees (and perhaps also professional planners in the near future) have a fiduciary duty to act in the interests of their investors. This surely cannot mean simply the avoidance of underperformance compared to competitors. An ongoing obligation to search for means of outperformance is implied.

Of course the issue of carbon pricing does become incredibly mired in and confused by politics. On the one hand, the Federal Government, in its attempts to appease special interest groups, is in danger of fatally weakening the price signals that are the essential ingredient of a successful emissions trading policy.

On the other, Tony Abbott seems intent on totally avoiding any responsibility to the global environment and future generations by simply describing carbon pollution reduction schemes as a “big new tax”. The truth is that, at the level of national and global economies, the cost of effective action to significantly abate global warming is very modest indeed, and really irrelevant, compared to the cost of inaction.

In Australia, for example, which is one of the highest carbon polluters in per capita terms, the cost of effective action is estimated at between 0.1 per cent and 0.15 per cent per annum of GDP growth – hardly worth considering for a country whose long-term growth rate is likely to be somewhere between 2.5 per cent per annum and 5 per cent per annum, depending mainly on global market conditions and domestic economic policy.

Certainly the carbon price will affect energy costs. The dominant sources of greenhouse gas pollution for Australia are firstly, the electricity generation industry and secondly, transport fuel. But it should be remembered that even when the price of oil recently quadrupled, for reasons that had nothing to do with the carbon price, it did not stop record world economic growth.

On the contrary, the boom was shattered, not by the cost of economic inputs, but by the collective behaviour of the financial services industry – and in particular by underpricing financial risk. At the individual company and sector level there will, however, certainly be winners and losers as the world adjusts to both an increasing price for carbon and some inevitable costs of global warming. (For example, insurance costs associated with “natural” disasters.)

This is precisely why investors need to have a heightened awareness of the carbon risks that are present in virtually all portfolios, as well as the potential premiums available for holding assets whose values will rise in a world subject to both carbon constraint and changed climatic conditions.

An obvious place to start is renewable energy; but equally, an obvious risk to avoid is potential stockmarket bubbles around new green technologies and highly speculative start-up enterprises.