Equities

Climate change: redefining the risks

Climate change will be a defining theme in the global economy, industry and financial markets.

09/08/2017

Andrew Howard

Andrew Howard

Head of Sustainable Research, ESG

Ovidiu Patrascu

Sustainable Investment Analyst

Climate change will be a defining theme in the global economy, industry and financial markets. We are concerned that our industry has focused more on urging action and marketing products than on developing robust analysis and risk management. We introduce Carbon VaR as a new tool to quantify and manage climate risks.

Earlier this year, we published the Climate Progress Dashboard, a new approach to measuring the pace of progress in mitigating the extent and impact of climate change. While the dashboard can help investors determine the current status and direction of climate action, it tells us a little about how to manage risks for a portfolio or individual stocks. Standard analysis includes carbon footprints and fossil fuel exposure, but these measures are too implistic to analyze the complexities of climate change properly. Alongside the Dashboard, we have therefore developed a number of other analytical tools. Carbon Value at Risk (Carbon VaR) is a major advance in helping investors measure the threat to their individual portfolios.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.