Research Brief: Top-Down Portfolio Implications of Climate Change
The physical risks of climate change have potential consequences for long-term investors
Key Findings:
- Environmental changes throughout the remainder of the 21st century will undoubtedly influence economic trends. To assess the top-down impact of climate change for strategic asset allocation, we consider both optimistic and pessimistic scenarios.
- Our analysis suggests that growth-oriented assets, such as equities, would be directly impacted by climate change. This impact is likely to vary significantly across countries, with the most sizable impact expected in certain emerging markets.
- A top-down climate risk-aware portfolio would tilt away from regions and assets that are expected to be adversely affected for better risk-adjusted returns.
- Top-down views should be combined with bottom-up research for better portfolio outcomes.
Research Paper
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