Climate change is widely recognized as one of the most important and complex risk factors faced by investors in the foreseeable future. Its fundamental uncertainty has seen financial institutions employing scenario analysis to assess and analyze the potential climate risks within their investment portfolios and strategies. This has led to the emerging practice of combining and integrating results from climate risk analysis and traditional investment risk analysis, which has encountered a variety of challenges.  

Notwithstanding these challenges alongside the volume of potential impact, we have actively progressed to further integrate climate risks into investment decision-making with the recent release of our integrated economic and climate scenarios. 

On May 21, our newly appointed Chief Innovation Officer, Hens Steehouwer and Bert Kramer, Head of Climate Research spoke to Investments and Pensions Europe (IPE) about our approach and how we have addressed the unique challenges in addressing climate change in the investment process. 

The webinar, available below discussed: 

  • The differences between climate risks and traditional economic and investment risks  
  • How these differences are linked to the challenges in combining ‘what if’ deterministic climate scenarios with traditional stochastic economic scenarios  
  • How these challenges can be addressed by effectively utilizing climate scenarios   
  • Climate scenarios’ additional value in quantifying potential financial impacts for strategic asset allocation and stress-testing purposes

 

Related whitepapers 

‘Integrating economic and climate scenarios’ whitepaper   

Our whitepaper ‘Íntegrating economic and climate scenarios’ is available to a specific audience in the financial services sector. You can submit a request for the whitepaper here.

Upcoming in-person climate risk workshop

Want to learn more on how financial institutions can assess the market implications arising from climate-related physical and transition risks and what investment opportunities may emerge as part of the net-zero transition? 

Our Climate & ESG Solutions team will be hosting a climate risk workshop in London during London Climate Action Week on June 26 that will feature our climate experts and special guest speakers from the Cambridge Institute of Sustainable Leadership, The Pensions Regulator and Cambridge Econometrics. 

Register your interest here

 

Learn more about our Climate Scenario Analysis Solution - ClimateMAPS

 

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