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Managing Climate Risk in Investment Portfolios

categories: Americas, Asia Pacific, Australia, EMEAI, Environmental, Governance, Social, NAGY Zoltan, Rauis BRUNO, Investing (Investment Management), Portfolio Construction and Optimization, Responsible Investing, Risk Management, Asset Managers (Quant or Fundamental), Asset Owners, Banks, Hedge Funds, ESG Products & Services, Portfolio Management Analytics, ESG Climate Solutions, ESG Climate VaR, Equities

Investors are increasingly concerned about how climate change and a transition to a low-carbon economy could impact the risk and return profile of their portfolios. In this case study, we selected a sample portfolio representative of a global actively managed fund in terms of its risk-return characteristics and used the MSCI Climate Value-at-Risk model to examine the different dimensions of climate-related risks. We show how Climate VaR can be used to measure climate risks for the portfolio as a whole, as well as further explore which sectors, countries and securities were driving these risks in the portfolio.

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