Net-Zero Alignment: Managing Portfolio Risk Along the Net-Zero Journey
Apr 25, 2022
In this third paper in our “Net-Zero Alignment” series, we examine the challenges investors face when looking to measure and manage climate risk in their portfolios, while meeting the imperative of reaching net-zero emissions.
Broadly speaking, climate risk can be broken down into physical and transition risks, and it can impact companies and investors via both microeconomic and macroeconomic transmission channels. Given climate risk’s multifaceted nature and the long time horizon on which climate change is unfolding, investors face an elevated level of uncertainty when making portfolio decisions. What approaches can they take as they seek to manage these risks?
Impact on hypothetical portfolios if temperature rise held to 1.5°C
We ranked these hypothetical portfolios from lowest to highest in terms of return impact under the 1.5°C temperature-rise scenario, providing the breakdown in terms of policy-related (negative) impact and technology-related (positive) impact.
Analysis as of September 2021.
Net-Zero Alignment: Objectives and Strategic Approaches for Investors
Net-zero investing means implementing a decarbonization pathway for a portfolio, using its “emissions budget” to achieve a temperature scenario well below 2°C.Explore More
Net-Zero Alignment: Portfolio Construction Approaches for Investors
Post-COP26, the need to reach net-zero — that is, producing less carbon than we put into the air — is more compelling than ever.Read More
Climate and Net-Zero Solutions
A set of tools to help investors understand how climate change could affect their portfolios, identify low carbon investment opportunities, and set net-zero targets.Learn More