EDHEC Research for Institutional Money Management with Pensions & Investments (P&I)

In this EDHEC Climate Institute special issue supplement to Pensions & Investments, we explore climate change’s impact on equity valuation, the need for probabilistic climate scenarios, and transition finance regulation. We also highlight high-resolution climate data for risk assessment and resilience and InfraTech 2050’s role in mitigating transition and physical risks, offering insights for climate-resilient investment strategies.

Author(s)

Riccardo Rebonato, Nicolas Schneider, Rob Arnold, Conor Hubert, Nishtha Manocha, Frédéric Ducoulombier

We first examine how climate risks—both physical and transitional—affect equity valuation, revealing potential market mispricings.

We then introduce a probabilistic framework for climate scenarios, emphasizing the low probability of achieving the Paris Agreement target and the need for a more realistic alignment between economic recommendations and policy action.

Recognizing the localized nature of climate shocks, we explore how granular high-resolution climate data enhances risk assessment, allowing investors to identify sector- and region-specific vulnerabilities.

We also highlight InfraTech 2050, a science-driven initiative systematically evaluating technologies and strategies for decarbonization and resilience across 101 infrastructure asset subclasses, with granular insights into data infrastructure, a key component of modern economies.

Finally, we assess the role of transition finance, identifying gaps in the EU regulatory framework and proposing key reforms to better align investment with climate goals.