Integrating climate risk considerations within portfolios: An investor’s viewpoint

Nasreen Kasenally and Michael Baldinger

Sustainable investing (SI) is one of the fastest growing areas in finance. According to the Global Sustainable Investment Alliance (GSIA, 2019), global sustainable investment assets in the five major markets – Europe, the US, Japan, Canada and Australia/New Zealand – grew by 34% in two years. As an investment approach, SI covers many themes and considerations, but latterly the role of environmental factors has risen to the top of the agenda, both within the investment community and beyond.

In this chapter, we will assess the ways in which investors can consider climate change in the context of their portfolios. Our starting point is an assessment of the role of environmental, social and governance (ESG) integration in its broadest context, and the additional insights it offers when evaluating investments. We then explore the specific considerations of environmental factors, particularly climate change.

Given the growing significance of climate as a driver in the investment process, at UBS Asset Management (UBS-AM) we have developed an investor framework called the Climate Aware framework. To explain the approach in practice and explain the significant role of engagement, we

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