“Let us take advantage of the opportunities presented by climate action and lay the foundations for a more prosperous and secure future for all.”
Ban Ki-Moon, Secretary General, United Nations
In recent years discussion on climate change and sustainability has increased markedly, both in society at large and among the finance community. Over the last 12 months sustainable and responsible investment tools and products (‘ESG’) has become a dominant topic of conversation among finance professionals – climate change linked risks and low carbon investment products feature prominently.
A range of opportunities is emerging for banks to offer finance products to meet the growing demand of institutional investors, corporates, SMEs and retail clients for sustainability focused alternatives. Investors of all backgrounds are, for example, buying ‘Green Bonds’, in which the bond proceeds are ring-fenced to fund specific projects that lower carbon footprints or meet other sustainability objectives. The ‘Green Bond’ market in 2014 reached an unprecedented US$ 37.0bn of new issuances. Linked to these ‘pure’ green bonds, equity-linked bond derivatives are emerging as new investment products. Ethical investment indices, some of which focus on low carbon features ('Low Carbon ESG indices'), are also growing in demand. As the transition to a low-carbon global economy progresses, project finance into renewable energy, industrial retrofitting and other projects are expected to grow.
Responding to this dynamic landscape, our work focusses on:
Climate Change and ESG Factor Stress Testing
Large pension and sovereign wealth funds are increasingly seeking to stress-test their asset portfolios for climate risks. This trend is driven in part by the evolving regulatory landscape for these institutional investors (particularly in Europe), which is adding pressure to integrate ESG criteria into the investment process.
We have developed a unique approach to stress-test for climate change as a material risk factor in the equity portfolios of institutional asset owners and managers. On the basis of our success in applying this approach with a leading financial institution, we are currently expanding our ESG stress-testing services.
OUR METHODOLOGY FOR CLIMATE CHANGE STRESS TESTING
Product and Service Innovation
We work with your teams to identify new low-carbon and sustainable product opportunities and support shaping green finance deals through our extensive global networks.