Carbon Risk Assessment – Strategies for Financial Institutions

On July 27, 2015 I attended and afternoon series of lectures at the 7 World Trade Center office of Moody’s Investor Service in New York City. The event was organized by 2 degree Investing Initiative and was titled “Discussing Carbon Risk Assessment Strategies”. One discussion was about US Investor-Owned Vertically Integrated Utilities and how these businesses are coping with Carbon Reduction Policies. Many of these companies are able to adapt and work with regulators. It was stated that coal generated electricity will be with us for some time.

Several models of assessing carbon risk and the financial markets were presented. These methods and stress test mechanisms apply mostly to stocks and not Carbon Xprint type of investments. Still the meeting highlighted the increasing role that climate change is playing in investment decisions. The report by Mercer can be downloaded here. 2 degree Investing Initiative also just released a report on a carbon stress testing framework and that report can be found here.

It was unclear how the recent law by the French Government requiring companies to disclose on their annual financial report the financial risk associated with climate change, the measures taken to reduce those risks, and the consequences of the company’s activities on climate change would be implemented. It was unclear what methods the French Government would require.

Gary Keir