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Climate change and climate risk: An index perspective

categories: Research Paper, EMEAI, Australia, Asia Pacific, Americas, DOOLE Stuart, SHAKDWIPEE Manish, Investing (Investment Management), Portfolio Construction and Optimization, Responsible Investing, Asset Owners, Asset Managers (Quant or Fundamental), Hedge Funds, Indexes, ESG Products & Services, Equities

A transition to a low-carbon economy could reduce demand for carbon-intensive products and services in favor of low-/zero-carbon counterparts. This migration in demand could also alter the risk-return profile — not only of individual companies but of some entire industries. The MSCI Climate Change Index aims to reflect these potential changes, increasing the index weight of companies identified as exposed to a low-carbon transition, while decreasing the weight in companies negatively exposed to such changes, while seeking to maintain broad market exposure.

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