Publications

- January 1, 2020: Vol. 14, Number 1

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Ramping up climate risk analysis: Understanding the financial impact of climate change

by Will Robson

Up until now, when it comes to ESG, investors have tended to just focus on buildings, looking to reduce carbon emissions and focussing on energy performance and benchmarking.

Investors also often separate ESG goals from a broader financial analysis. This is due, in part, to a lack of tools that can systematically assess the financial impacts of climate change across their portfolios.

Being a big part of the global warming problem gives the industry the opportunity to be a big part of the solution. If efforts to tackle climate change are properly integrated into investment processes, then they are likely to be widely adopted and have a greater impact. For example, if we are told that we need to reduce carbon output by 20 percent, then what does that equate to in terms of capex costs? How do we quantify the benefits? And how do these feedback into a portfolio’s risk profile? Assessing this transition risk is difficult, but it should broaden the reach of carbon reducing

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