Beyond Carbon Price: The Quantification of Climate Transition Risks

Overview - What methodologies allow investors to move beyond emissions metrics to capture the true financial impacts of the energy transition?

Climate-transition risk quantification is a crucial (and often under-addressed) dimension of financial risk management. In order to effectively assess how portfolios may gain or lose value under climate transition scenarios, it is crucial to look beyond emissions-based metrics.

• Transition risk assessments should consider both revenue and operational cost transmission channels. The study shows that demand-driven revenue effects can be as material as carbon pricing.
• Companies within the same sector might experience highly heterogeneous financial impacts, with both "winners" and "losers" in transition-sensitive sectors such as Utilities and Energy.
• Transition risks are highly dependent on scenario and time horizon assumptions. Given the uncertainty surrounding the socioeconomic pathways of the energy transition, multiple scenarios should be considered.

Speakers

Vincent Bouchet
Director of ESG and Climate Research, Scientific Portfolio

Thomas Lorans
Senior Research Engineer, EDHEC Climate Institute

Shahyar Safaee
Deputy CEO and Director of Business Development, Scientific Portfolio

Kathryn Saklatvala
Senior Advisor, Scientific Portfolio

About Scientific Portfolio:

Scientific Portfolio is the latest commercial venture incubated within the research ecosystem of EDHEC Business School (EDHEC), one of the world’s leading business schools.

Scientific Portfolio has assembled a team with a broad range of expertise and backgrounds, including financial engineering, computer science, sustainable and climate finance, and institutional portfolio and risk management. It proudly carries EDHEC's impactful academic heritage and aspires to provide investors with the technology they need to independently analyze and construct equity portfolios from both a financial and extra-financial perspective.