11 October 2023
5 min
Responsible Investment Consultant
In a world that’s subject to the inherent uncertainties of climate change, asset owners still need to make informed decisions. In a situation like this, where the evolution of events is unknown, scenario analysis is a useful way to ask ‘what if’ questions, ponder potential future states of the world and explore how assets and liabilities may change in these different versions.
In this paper, we discuss how we've evolved our approach to climate scenario analysis and modelling. We believe that models can be improved by focusing on real-world action and market response – ie we can construct different climate scenarios based on the speed and strength of each.
This is essential, because asset owners are increasingly required to undertake climate scenario analysis. But if the results of their analysis aren’t comprehensive enough, the effects of climate change are likely to be underestimated. A clearer and more accurate picture of the risks can only help institutional investors to make crucial decisions.
To read more, download our publication.
If you’d like to discuss anything covered here in more detail, please get in touch.
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