Thinking Strategically About Climate Change: Risks and Opportunities

10 Pages Posted: 18 May 2012

See all articles by Danyelle Jann Guyatt

Danyelle Jann Guyatt

Climate Insight Pty Ltd; University of Bath

Jane Ambachtsheer

Mercer Investments

Elisabeth Bourqui

Mercer Canada

Date Written: Spring 2012

Abstract

This article presents the results of a large-scale research project analyzing the potential impact of climate change on investors’ portfolios. This collaborative endeavor was led by Mercer and included 14 global institutional investors representing in excess of $2 trillion in assets under management, together with the International Finance Corporation and the Carbon Trust. The article summarizes four climate change scenarios through a factor risk framework to measure the different sources of investment risk. Institutional investors can use this framework to enhance their understanding of climate-related investment risks and opportunities across many asset classes and regions. One key finding is that risks and uncertainty around climate policy can account for as much as 10% of total fund risk in a pension fund with a hypothetical strategic asset allocation. The authors also suggest that some asset classes are more sensitive to climate change in terms of both the risks and the opportunities that need to be proactively managed, including infrastructure, private equity, real estate, sustainable listed equities, agricultural land, and timberland.

Keywords: Climate Change, Climate Policy Risk, Pension Fund, Risk Management, Strategic Asset Allocation

Suggested Citation

Guyatt, Danyelle Jann and Ambachtsheer, Jane and Bourqui, Elisabeth, Thinking Strategically About Climate Change: Risks and Opportunities (Spring 2012). Rotman International Journal of Pension Management, Vol. 5, No. 1, p. 58, 2012, Available at SSRN: https://ssrn.com/abstract=2061697

Danyelle Jann Guyatt (Contact Author)

Climate Insight Pty Ltd ( email )

Street
Street
Melbourne, Victoria 3000
Australia

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Jane Ambachtsheer

Mercer Investments ( email )

Elisabeth Bourqui

Mercer Canada ( email )

Head Office 161 Bay Street
P.O. Box 501
Toronto, Ontario M5J 2M4
Canada

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