Learn to navigate climate risk effectively.
Yes, we offer an all-encompassing portfolio climate risk assessment that includes an analysis of physical risk, which is aligned with ISSB reporting standards. While we acknowledge the long-term implications of physical risk, such as its effects on infrastructure and natural resources, the immediate, market-shifting impact due to climate change will largely come from transition risk. This is because societal and governmental responses to climate change can occur rapidly and dramatically affect asset values and investment portfolios, whilst physical risk at a portfolio level will be much more diversified and less material in the short to medium term. Therefore, while our product provides a comprehensive overview of climate risk, it emphasises transition risk to offer more immediate and actionable insights for today's investors.
Our carbon transition risk product offers unique advantages that complement and enhance what your existing data vendor provides.
Multi-Asset Solution: Our product covers a broader spectrum of asset classes than most traditional data vendors. It provides coverage across public and private equities, fixed income, and infrastructure.
Nowcasting: Unlike traditional data vendors who typically rely on historical reported data, our product incorporates a feature called 'nowcasting.' Nowcasting uses machine learning algorithms to provide near-real-time estimates of a company's emissions, offering a more current and dynamic view of its carbon footprint.
Flexible and Scalable Scenario Analysis Tool: We equip you with a comprehensive scenario analysis tool that includes out-of-the-box scenarios from NGFS and IPCC. This feature allows you to assess a wide array of climate scenarios based on varied parameters, a capability that might not be as extensive with traditional data vendors.
By offering these additional capabilities, our product provides a more holistic view of carbon transition risk, thereby enhancing decision-making and risk management within your organisation.
Our products are designed to align closely with the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB) regulations. While our tool aids in compliance by providing granular carbon transition risk assessments, it does not cover the physical risk and governance aspects of these comprehensive frameworks.
We provide robust quantitative data, something many solutions lack. This data-driven approach allows you to monitor and manage carbon transition risk more effectively. In addition, we offer climate scenario analysis tools, enabling you to project and assess various potential futures under different climate scenarios. These features collectively enhance your ability to adhere to these critical sustainability standards.
Investing in a market-leading position on carbon risk can offer a competitive edge, despite the challenges it might pose with respect to deviating from benchmarks or Strategic Asset Allocation (SAA). Increasingly, market players are recognising the financial benefits of managing carbon transition risk and setting Net Zero targets. Our product facilitates understanding and achieving these targets, as well as integrating them into your SAA work.
Moreover, our tool provides invaluable data for stock selection, maintenance, and due diligence. It also supports constructive engagement with managers and companies on climate-related risks and opportunities. Regulatory compliance is another key benefit; our solution aligns with the Task Force on Climate-related Financial Disclosures (TCFD) requirements and potentially upcoming International Sustainability Standards Board (ISSB) and Treasury mandates.
Proactively managing carbon risk now will place you ahead of evolving regulations. It's not just about compliance—it's about readiness. Think of it as gearing up before the regulatory climate toughens. With our tool, you can adeptly navigate these changes, relying on its timeliness, accuracy, and comprehensiveness. Don't wait for regulations to grow teeth. Start mastering your carbon risk management today.
Our product is highly specialised; it is designed to measure the real risk associated with the transition to a carbon-constrained world, rather than serve as a broad-based ESG tool. While it does cover some elements of the 'Environmental' aspect in ESG, its purpose is to provide meaningful and granular financial risk assessment related to carbon transition, going beyond surface-level ESG considerations.
While we certainly acknowledge the broad importance of ESG evaluation, it's critical recognise that carbon transition risk, in particular, carries the potential to cause significant disruptions in financial markets. This can lead to potential losses amounting to trillions of dollars from balance sheets if not adequately understood and managed. Given the uncertainty surrounding how these risks will manifest in the future, having a specialised tool dedicated to measuring and analysing carbon risks is crucial for future preparedness.
In an ever-evolving global landscape, the question of prioritising management of carbon transition risk is indeed valid. However, it's critical to remember that when the impacts of this transition hit, they will hit swiftly and possibly without much warning. To best prepare for this reality, it's advisable to preemptively manage this risk.
Imagine the carbon transition as a market and regulatory tipping point. Just as the financial crisis of 2008 proved, organisations that fail to anticipate and adapt to these shifts can face dire consequences. One can take a lesson from the fate of Bear Stearns or Lehman Brothers, which failed to adequately manage its exposure to subprime mortgage risks and eventually collapsed when the housing bubble burst.
Similarly, when the transition to a carbon-constrained world becomes non-negotiable, companies unprepared for this shift may face significant reputational, legal, and financial risks.
There are five key transition risk factors to consider here: Market, Regulation, Reputation, Legal, and Technology. Let's take a brief look at each:
Market Risk: As the world transitions towards a low-carbon economy, companies that fail to adapt might lose market share to more sustainable competitors. Furthermore, as investors increasingly factor in carbon risk into their decision-making, companies not adequately managing this risk may face lower valuations and higher cost of capital.
Regulatory Risk: Governments around the world are stepping up their efforts to combat climate change through carbon pricing, emissions caps, and more stringent regulations. Non-compliance can lead to substantial fines and penalties, and potentially, a loss of licence to operate.
Reputational Risk: Companies perceived to be lagging in their response to climate change can face significant reputational damage, leading to a loss of consumer and investor confidence.
Legal Risk: There is a growing trend of legal actions being taken against companies for their failure to manage climate-related risks adequately. These legal actions can result in substantial costs and potential damages.
Technological Risk: The transition to a carbon-constrained world will be accompanied by rapid advancements in low-carbon technologies. Companies that fail to keep up with these changes may find themselves left behind.
These risks are not just independent factors; they can cascade, with one triggering another, creating a complex web of interrelated challenges. The domino effect of these risks can potentially disrupt entire business models and sectors.
However, managing carbon transition risk doesn't have to be an overwhelming task that drains your time and resources. We understand these concerns, and that's why our product is designed to do the heavy lifting for you. It provides detailed assessments of carbon transition risk, offering clear insights that can inform your strategic decision-making.
Our goal is to enable you to act proactively, rather than reactively. By identifying and managing these risks now, you can align your business with the trajectory towards a sustainable, low-carbon future. This proactive approach not only mitigates risks but also opens up opportunities to drive innovation and gain a competitive edge.
Whilst it may seem daunting, the management of carbon transition risk is a strategic imperative in today's business environment. Ignoring this risk might save time and resources in the short term, but the potential long-term implications could be far-reaching and severe. On the other hand, recognising and managing these risks today can pave the way for a resilient and sustainable future for your business.