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Framing Climate Change Risk in Portfolio Management

Policies to regulate greenhouse gases are being developed and implemented in major markets around the world. Because these new policies bring costs as well as opportunities, prudent investors will factor climate change risk into investment decisions.

Key Findings

Executive Summary

Policies to regulate greenhouse gas emissions caused by human activity are being developed and implemented in major markets around the world. Because these new policies bring with them costs as well as opportunities, prudent investors will factor climate change risk into investment decisions.

This report provides investors with a multidimensional framework for assessing climate risk in their portfolios. This tool stresses the competitive dynamics resulting from climate policies as the most important investment issue.

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p>Different types of climate policies can have different effects on industries and on companies in the same industry. This report shows how the structure of these policies will shape companies’ competitive responses. Both policy design and competitive response will define the impact on company finances. Despite uncertainties, especially in the United States, investors can use existing financial techniques to discount the potential consequences of climate policies on the value of their investments.

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