Mike Rasnic sits on the front porch of his home which is surrounded by floodwater on March 22, 2019 in Craig, Missouri. Scott Olson | Getty Images

The risks of climate change are already impacting investors, with increasingly frequent climate disasters like wildfires, drought, flooding and heatwaves threatening business operations and properties across the world. Many investors are now choosing to funnel their money into investments that address climate change risk, and asset managers are rushing to meet the demand. Investors last year put $20.6 billion into funds focused on environmental, social and governance — or ESG — issues, according to Morningstar data, almost quadruple the record the year prior. In the U.S., money managed with sustainable investing strategies now comprises over a quarter of total investment assets under management, according to the Global Sustainable Investment Alliance. Bank of America also estimates that in the next two decades, there will be over $20 trillion of asset growth in ESG funds, in which climate change investment is a major component. The focus on climate risk is driven largely by a younger generation of investors who want their money invested with sustainability in mind. They also want to avoid companies with bad track records on ESG issues that could face future fines. Despite the rise in popularity, sustainable investing isn't as simple as it sounds. Critics argue that it's basically impossible to define funds that have an ESG mandate. SEC Commissioner Hester Peirce, for instance, argues that while the intentions of the investing strategy are sound, slapping an ESG or sustainable label on a fund is subjective and doesn't mean it's necessarily in line with an investor's priorities. "It seems to be like 2020 is shaping up to be the year of resource misallocation in the name of — but not actually — saving the climate," Peirce said in a phone interview with CNBC. "If we really want to save the climate, we would allow capital to flow to technologies to solve those problems. That doesn't involve putting artificial constraints on where capital flows, which some of this trend will do."

Others argue that the sustainable investing space is essential, but will need to be better defined this year if it wants to continue gaining investor money. "ESG is inclusive — it helps better measure both performance, but also future potential of different investments through a lens that's not purely financial," said Bruno Sarda, the North America president for CDP, an international nonprofit that works with companies to disclose financial risks of climate change on their bottom line. "Climate change has such strong linkage to financial and operational performance that it needs to move beyond a pure ESG definition," he said. The demand for ESG investment options has risen so high that asset managers are scrambling to provide new funds. ESG funds now account for more than $30 trillion worldwide in assets under management. One recent example is the world's largest money manager BlackRock, which has vowed to make climate change the core of its investing strategy. BlackRock announced broad changes aligned with ESG, including exiting investments in coal production, introducing more sustainability-focused funds and voting against corporate managers who aren't making progress on fighting global warming.