Integrating a climate strategy into your investment process intro

Reaching net-zero emissions likely will require investors to integrate climate considerations into their investment processes. That may include measuring and reporting on exposure to climate risk, developing low-carbon investment strategies, factoring climate change into risk management, engaging portfolio companies, and benchmarking performance.

  • Setting a net-zero target may start with quantifying the impact of your investments on climate change based on their warming potential, together with running scenario analysis to understand the implications of climate change on investments
  • Constructing sustainable portfolios may include reducing exposure to carbon-intensive companies and industries, increasing exposure to clean-energy technologies and minimizing the risk of stranded assets.
  • Reporting on the sustainability of existing investments, and building new investment products that fuse climate considerations with financial objectives.
  • Engaging portfolio companies with the goal of understanding their climate targets and assessing their progress toward net-zero emissions.
  • Benchmarking performance based on portfolios’ alignment with climate targets.

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Breaking Down Corporate Net-Zero Climate Targets

Breaking Down Corporate Net-Zero Climate Targets

Comparing decarbonization targets among companies can be difficult. Even targets that appear to be similar on the surface can turn out to differ significantly in their details. This guide from MSCI offers a framework for evaluating companies’ climate targets consistently.

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Reporting on climate risk


Reporting on Climate Risk

More and more asset owners and investment managers across the world are disclosing their climate-related exposures. The reporting is designed to address growing demand from clients, regulators, employees and other stakeholders to put net-zero at the center of their strategies and organizations.

The world’s largest economies have standardized around the Task Force on Climate-related Disclosures (TCFD), a voluntary framework comprising four categories of reporting about the climate-related risks companies face.

Nearly 60% of the world’s 100 largest public companies support the TCFD1, report in line with the TCFD recommendations, or both. Several leading reporting organizations, including CDP, the Climate Disclosure Standards Board, and the Sustainability Accounting Standards Board, also are developing a climate-related financial disclosure standard.


Tools for Climate Risk Reporting

Tools for Climate Risk Reporting

Tools from MSCI streamline climate risk reporting across multi-asset class portfolios for both the TCFD and clients.

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Integrating footnotes

 

1Financial Stability Board FSB encourages the IFRS Foundation and authorities to use TCFD’s recommendations as the basis for climate-related financial risk disclosures