The roads to a low-carbon transition

We have seen a significant change to the macro environment over the last month, but our analysis remains very relevant to long term investors. We have seen violent moves in financial markets and yet ESG tilted indices have outperformed the wider market – suggesting an increased investor focus on ESG issues. Whilst most stock prices may mean-revert from current levels, we must use this opportunity to get our economies to transition to a more sustainable basis.

In December 2017, we began working on climate scenario analysis with Vivid Economics to develop a construct for understanding company-level climate-related risks and opportunities to help investors make informed decisions. The first report, published in 2018, included six potential scenarios, three focused on policy timing and three on future technology costs. Following the IPCC 1.5ºC special report, we expanded our initial work – increasing the number of scenarios to 10 to represent a broader range of low-carbon futures and taking into account the latest IPCC carbon budgets.

Our follow-up report – The roads to a low-carbon transition: what it means for investors, is now available – please download it here. The report provides a construct for investors to better understand opportunities and risks about the low-carbon transition and make informed decisions. It highlights how we are investing in research to shape and challenge views within scenario analysis.