Pricing Climate Risk

Climate risk will increasingly be reflected in market prices, leading to a potentially dramatic repricing across asset classes, sectors, companies and individual securities.

The real question is whether the transition will be an orderly one ushered in by government measures and gradual market adjustments, or an abrupt, sharp decline in market sentiment triggered by a series of climate “Minsky moments.”

Regardless of the trajectory, the implications for investors’ portfolios will be very significant.

Asset Repricing

Co-hosted with PGIM, this webinar will examine how assets will be repriced as climate risk alters the behaviour of market participants:

• What aspects of climate change are already reflected in market prices? What aspects are not?
• Why have prices in some markets so far not reflected climate risk?
• What catalysts might cause marketsto reprice assets, either gradually or abruptly?

Transcript (with timings)

4:08 – How well is the market pricing in climate risk at the moment?

5:02 – Impact of government policy

6:14 – Evaluating sectors vs countries

7:40 – Does the time horizon affect the pricing?

8:10 – Catalysts for market re-pricing

11:09 – Mark Carney had talked about a Climate Minsky moment. Is that likely?

13:28 – NZ SuperFund has a four-part approach to climate change and climate risk pricing.

17:21 – More investors are now finding investment opportunities in climate change. One of the areas is in real estate.

19:18 – NZ SuperFund: Using data from various sources to add value to the investment process

23:15 – How can you implement via both top-down and bottom-up approaches?

27:35 – When thinking about an exclusion policy, should climate change be an ethical or investment set of exclusions?

30:09 – Has the improvement in data and analytics in recent years caused a more active approach to investment and divestment decisions?

32:21 – When will reliance on fossil fuels end?  How should investors be thinking about this in terms of stranded asset risk?

37:16 – There are 2 new technologies that will help to decarbonise some high-emitting industries, but both can only be accessed via private markets.

40:02 – Is it possible that assets with poor ESG credentials are discounted to such a level that they become good investments?

43:21 – What are some climate-related opportunities for investors these days?

 

Presenters:

• Shehriyar Antia, Head of Thematic Research, PGIM
• Lucas Kengmana, Senior Investment Strategist, NZ SuperFund

Moderator:

• Teik H. Tan, Executive Director, Investment Innovation Institute [i3]