Investors use forward-looking temperature models to measure and report portfolio temperature rise. Such models estimate the contribution of a portfolio’s projected carbon emissions toward climate change and deliver a temperature value that shows the degree of warming with which those emissions align.
The private capital that investors deploy to start and grow companies had a smaller carbon footprint than the funds used to buy distressed debt, an analysis by MSCI and Burgiss finds.
Climate change could lower the value of corporate bonds and cause credit spreads to widen to more than twice their historically narrow levels, according to an analysis by MSCI that examines two temperature-rise scenarios.
Companies could see their borrowing costs rise in proportion to their climate transition risk if policymakers were to establish a strict timetable for reaching net-zero emissions with the goal of limiting global warming to 1.5°C, according to MSCI’s model-based analysis.
Privately held companies face roughly the same climate-transition risk as listed ones, but the relative lack of climate-related disclosures by privately held firms can make aligning private equity portfolios with net-zero a challenge for investors.
Higher-education endowments are sharpening their focus on the risks and opportunities of climate change, which by threatening the well-being of people and communities runs counter to their mission of support for institutions that provide education for millions.
Investors are assessing the resilience of companies to climate risk and the transition to a net-zero world, and are focusing their shareholder engagement accordingly. The goal: to influence companies to consider the risks and opportunities of climate change.
The transition to a net-zero economy is creating risks and opportunities on a global scale. Investors may face material investment risks or miss large investment opportunities if they fail to address the challenge of aligning their portfolios with broadly accepted climate scenarios.
Investors need quantitative data that allows them to assess the vulnerability or resilience to climate change of every asset, so they can value both risks and opportunities. The challenge is to find the most meaningful information amid the varying and, at times, limited disclosures.
The financial risks associated with climate change could come from a transition to a net-zero economy or from extreme weather caused by global temperature rise. Investors want to know that companies are considering such risks as part of their long-term strategies.
Investors are sharpening their focus on climate-related financial risks. MSCI has examined the impacts of such risks on investment portfolios, with a focus on both the risks of transitioning to a net-zero economy and those tied to the impacts of a warming planet.
The Task Force on Climate-related Financial Disclosures (TCFD) provides a framework for reporting in line with global temperature goals. With its mix of objective, subjective and forward-looking metrics, the TCFD is designed to be suitable for all companies that raise capital.