Responding to Climate Change Risk in Portfolio Management

Since the Carbon Tracker Initiative’s first report*, in 2012, which highlighted the concept of a carbon bubble, there has been a steady increase in the level of interest and activity on the concept of “stranded assets”. This is demonstrated through activities such as the divestment campaign of, the Bank of England’s formal announcement in 2014 that it will investigate the financial risks of a “carbon bubble” and ExxonMobil’s publication of a carbon asset risk report as a result of shareholder pressure. In September 2013 we published a paper entitled “Unburnable carbon: How should investors respond?” in which we put forward a series of responses that investors may wish to implement when assessing and managing their portfolios’ exposure to climate change and carbon assets.

This paper highlights how we can help investors to assess their exposure to climate change, before identifying some of the options that investors may wish to implement (or have implemented on their behalf) in order to manage this exposure. We recognise that in order to avoid dangerous global warming of 2°C, then the whole global economy will have to decarbonise materially over the next few decades and that all sectors of the economy will be impacted by this.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.