Institutional investors, like all investors, rely on their research and analysis to uncover material information in order to improve investment strategies and attain higher returns. The effects of climate change have already had material effects on macro-economic indicators often used by institutional investors in Asset/Liability Management (ALM) and Strategic Asset Allocation (SAA). Incorporating the effects into investment strategy should therefore be a key component for predicting asset performance as climate impacts become more tangible for investment returns.
This paper, “Scenario Analysis for Systemic Climate Risk” by Ortec Finance and CFA (Climate Finance Advisors), highlights the importance of taking systemic, macroeconomic climate-related risks and opportunities into account when making strategic investment decisions. The paper also explores how investors are able to act on insights gained from such analysis. Four types of institutional investors are examined in this paper, each of which has slightly different ALM and SAA strategies given how they invest, their overall risk appetites, and investment horizons.
The Climate & ESG Solutions team at Ortec Finance specializes in integrating climate and sustainability insights into standard investment process modelling and analysis. This enables financial institutions to gain insights into quantified climate & ESG risks and opportunities, using efficient integrated software solutions. All in line with regulatory requirements across our client's strategic investment decision-making process.
Ortec Finance contributes to NGFS occasional paper: Case studies of Environmental Risk Analysis Methodologies
Central bank network NGFS has recognized Ortec Finance’s Scenario Analysis for Systemic Climate Risk as one of tools that can be used to analyze the potential impact from transition and physical risks associated with climate and other environmental factors on financial institutions.
Climate Risk quantification for financial institutions
Two papers on climate scenario analysis for financial institutions, written in collaboration with the Institute and Faculty of Actuaries. These papers explore how scenario analysis can be used as a tool for forward-looking assessment of climate-related risks and opportunities for financial institutions.
Comparing COVID-19 to the bursting of the carbon bubble
In the current environment, the realization of what it means to be exposed to systemic risk has never been so clear. Coronavirus is disrupting the global economy and financial markets effecting all sectors and regions.