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Net-Zero Alignment: Managing Portfolio Risk Along the Net-Zero Journey

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.



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