As climate risks intensify, investment analysis must rise to the challenge

Addressing the challenge of integrating climate change dynamics into investment decision-making.

November 2023, In the Spotlight

 

Key Insights

  • We believe climate change is set to have a material impact on investment performance across geographies and asset classes.
  • Data availability has historically been a notable headwind to analyzing climate change-related risks and opportunities.
  • While the challenges around climate data are not insignificant, the good news is that there is progress.

 

Written by

Maria Elena Drew Director of Research, Responsible Investing, TRPA


 

From the Field

Compelling opportunities for contrarian investors

Rate anxiety means utilities and high yield bonds offer value.

1 CAGR = Compound annual growth rate. It represents the consistent rate of growth had the indicator compounded at the same rate each year over the previous 10-year period.
2 This calculation refers to weighted average carbon intensity and applies the benchmark weighted average for greenhouse gas emissions/revenues.
3 The Greenhouse Gas Protocol recommends that a company should focus on which Scope 3 activities are expected to generate the most significant emissions and offer the most significant GHG reduction opportunities and are the most relevant to the company’s business goals. As a first step, companies should conduct a screening process using less specific data (i.e., industry average data). Next, each category should be examined to determine whether to further refine the emissions estimates.
4 The SBTi is a partnership between the Carbon Disclosure Project (CDP), the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact. It provides companies with a clearly defined pathway to future‑proof growth by specifying how much and how quickly they need to reduce their greenhouse gas emissions.

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MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

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