Sustainable Investment

The impact of climate change on the global economy is likely to be significant and long-lasting. 

Cambridge Econometrics is a world leader at quantifying climate-related financial risk, serving a broad range of the world’s biggest banks and investors.

Quantifying climate-related financial risks

Sustainable Investments diagram

Our economists can map out the scale and distribution of climate-related risks, over time, by economic sector and by geography.

We use a model of the global economy to quantify exposure to climate-related risk. Developed over 20 years ago E3ME was designed by Cambridge Econometrics specifically for this type of analysis and is continually updated and refined. It can:

Test the impact of different global temperature pathways (1.5˚C, 2˚C, 3˚C and 4˚C) across regions and sectors; and

Assess the impact of different climate-related risks, including:

The analysis provides the key economic indicators that you need to develop ‘climate risk-aware’, sustainable investment portfolios.

Climate scenario analysis for central banks

Climate Scenario AnalysisCambridge Econometrics can help central banks understand how climate risk will affect policy mandates, financial portfolios and macro financial stability. Read more about central bank stress tests.

NGFS and Bank of England miss an opportunity on net zero

Cambridge Econometrics is critical of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and Bank of England delayed scenarios published in June 2021 on the grounds that they are too optimistic in their assumptions.

This view is based on modelling work we have done on a delayed scenario analysis, featured in The Role of Climate Change Scenarios In Investment Portfolios published by GIC in June 2021.

If some companies and industries fail to adjust to this new world, they will fail to exist.

Carney and De Galhau, Governors of the Bank of England and France

 

Systemic Climate Risk Scenario Solution

In partnership with Ortec Finance we offer a service that takes the outcomes for economic indicators under different climate and transition scenarios and translates these into implications for the risks and returns to investment across different asset classes.

The resulting systemic climate risk-aware scenarios provide a unique set of quantified climate-adjusted economic and financial outlooks up to 2060 differentiated by country and global warming pathway.

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