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Investment Implications of Climate Change

Climate Risk: Right Here, Right Now!

Climate risk, thanks in part to Greta Thunberg, is now a mainstream media news topic, whilst the investment implications are becoming more profound, with 2019 being the fourth consecutive year in which weather and natural event losses have exceeded USD 200 billion.

This collection of recent papers covers a wide range of topics which identify some of the different ways in which climate risk is influencing investment-related decision making. FTSE Russell notes that countries taking the lead in climate risk initiatives may benefit from the more favourable repricing of their sovereign debt. Additionally, Willis Towers Watson identifies some of the operational challenges that insurance asset management companies face, while the BIS outlines potential 'nudge' policies that central banks might implement to help address some of the most pressing climate issues.

climate change protest


Becoming climate aware (UBS AM, 2020)

To coincide with the 2020 Davos Meeting of the WEF, UBS AM have produced this report which focuses on ways in which investors may align their investments towards a climate-smart future.

Climate change and the winners of the energy transition (NN Investment Partners, 2020)

NN Investment Partners investigates which companies are likely to benefit the most from the energy transition switch.

Climate Risk in European Sovereigns: Leaders and laggards (FTSE Russell)

FTSE Russell notes the progress that Europe has made relative to the Rest of the World in cutting carbon emissions, and goes more granular to find that the sovereign debt of those countries with the highest levels of adoption has traded at a premium to those where change has been slower.

Conceptualizing a Paris-Aligned Climate Index for the Eurozone (S&P Dow Jones Indices, Jan 2020)

In this paper from S&P Dow Jones Indices, they outline several new datasets and climate indices that intend to be impactful, but also aim to highlight the financial opportunities that might arise from the transition to a low-carbon economy.

How European insurance regulators are responding to climate risk (DWS AM, 2020)

For compliance reasons, this paper is only accessible in certain geographies

This paper from DWS AM examines the differing approaches taken by insurance regulators across the European Union.

An Inconvenient Transition: Will individuals manage to get by with less? (Aviva Investors blog, 2020)

For compliance reasons, this paper is only accessible in certain geographies

Aviva Investors suggests that individuals could make a considerable difference to the climate crisis, particularly in the developed world, if they committed to getting by with less. The question is-will they?

Weather, Climate & Catastophe Insight: 2019 annual report (Aon, Jan 2020)

Aon's annual Weather, Climate & Catastrophe report reveals that in 2019, global economic losses related to weather and other natural events hit USD 232bn in 2019, the fourth year in a row that losses have exceeded USD 200billion or higher.

Central Banking and Financial Stability in the Age of Climate Change (BIS, 2020)

The BIS outlines the roles in which central banks can help to coordinate climate change measures, including integrating sustainability measures into accounting frameworks, carbon pricing and additional policy initiatives.

The Economic Case for Combating Climate Change (BCG, 2019)

BCG undertook a study of the economically optimized paths for implementing climate change mitigation efforts in Germany and then applied this model to a number of the major GHG emitters. The encouraging findings from their studies are that there appear to be good economic as well as environmental reasons to adopt climate mitigation efforts.

Climate risk and response: Physical hazards and socioeconomic impacts (McKinsey & Company, 2020)

McKinsey & Company investigates the physical effects of changing climate and explores the risks both today and over the next three decades. In an attempt to inform the debate, they also estimate the probabilities and magnitude of potential impacts, so decision makers can better assess, adapt to and mitigate the physical risks of climate change.

A Practical Guide to Climate Change for Life Actuaries (IFoA, 2019)

This IFoA guide has been produced as an aid for actuaries which outlines the potential impacts that climate change might have on health and mortality, physical assets and financial markets and their potential implications for life insurers and actuaries.

Three Key Dimensions Impacting the Renewable Energy Market (Capital Dynamics, 2019)

Capital Dynamics investigates the main factors that are influencing and impacting upon the renewable energy market, including decarbonization, decentralization and disruption.

Renewable Energy Market Review: Facing up to new realities (Willis Towers Watson, 2020)

The Willis Watson Towers Natural Resources team in London have produced this report which outlines the significant changes in business models that various insurance industry players need to face and which are likely to prove critical to their future prosperity.