A new climate risk model for corporate debt

Insight has a long-standing commitment to responsible investment and has explicitly taken environmental, social and governance (ESG) issues into account in its fixed income research process for well over a decade. Climate change-related risks — litigation, physical risks, taxation and regulation — have been a key area of our focus over this time. We have developed a new climate risk model to help investors better understand the risks and opportunities that climate change introduces to their portfolios.

While our clients have been interested in our approach, there has been a dramatic upswing in their focus on climate change in the last two or three years. The reasons are obvious: the ratification of the Paris Agreement has signaled a step change in policy action and the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) has explicitly called on asset owners to report on how they are managing climate change-related risks and opportunities.

Our clients now ask us detailed and in-depth questions about the issuers we hold, how these issuers manage climate-related risks and opportunities, and the actions we are taking to manage climate-related risks in our portfolios.

With this level of attention, we concluded that we needed to put our analysis of issuers on a much more systematic and structured footing, allowing us to present a full cross-portfolio analysis and make meaningful assessments of how we are managing climate-related risks and opportunities.

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https://www.insightinvestment.com/globalassets/documents/recent-thinking/na_climate_risk_model_intro.pdf