Materiality-Weighted Portfolio Carbon Footprint
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The total carbon footprint of a portfolio has commonly been used both as a measure of that portfolio’s climate impact and as a measure of transition risk. However, we found that impact and risk measurement may require different approaches. A tonne of CO2 has the same impact on our climate no matter where or how it's emitted. But when it comes to a company's transition risk, not all emissions are created equal. Some emissions matter more, depending on where they come from and the industry context. We found that investors could get a better signal by focusing on a materiality-weighted carbon footprint.
Our analysis shows that, over the past decade, emissions-based transition risk has had a stronger relationship with corporate earnings, stock performance and credit risk than previous academic studies suggested.
MSCI ESG Research.
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Corporate Bonds and Climate Change Risk
In this paper, we highlight to investors and portfolio managers the significance of climate-change risk for the value of corporate bonds, as well as provide a framework for further research in this area.
Financing the Climate Transition
Historically, climate investing has focused on portfolio decarbonization, but investors are increasingly turning to a “finance-the-transition” approach, seeking to invest in transition opportunities. The two approaches are not exclusive and best used hand in hand.
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