Understanding how both the physical effects of climate change and the to a low carbon economy will either negatively impact or drive opportunities for individual investments for financial institutions. The topic is subject to increasingly stringent investor, regulatory and quasi-regulatory requirements as well as increasing requirements to publicly disclose their response to climate-related risks and opportunities, following formal frameworks such as the Task Force on Climate-related Disclosures (TCFD).
Risks like acute physical events or a sudden carbon tax are increasingly on the near-term horizon, and thus the response to manage these risks and position investments to benefit from the opportunities is paramount. Despite uncertainties around the precise effects of climate change, impacts can still be modelled with sufficient confidence of what could happen, to provide valuable input to a strong strategic response.
We use frameworks such as the TCFD to help understand the resilience of a business’ strategy and therefore help them, and their investors, lenders, and insurers to assess and price climate-related risks and opportunities.
Our Climate Change Risk Analysis services
Anthesis helps clients understand climate risks and opportunities using our three-step approach. This involves undertaking both a materiality assessment and deeper scenario analysis and modelling, to identify the key issues prior to working to develop solutions to them:
- Prioritise the climate risk and opportunities that matter most to across the investment portfolio . How – we establish this using a pull approach (materiality), asking key investee stakeholders (workshops/ online questionnaires) if the worst/best was to happen (informed by the science) which risks/opportunities would be most material to the bottom line. Output – a heatmap of all material climate risks and opportunities across the investment portfolio , ranked high to low.
- Analyse scenarios of the financial magnitude of the most important climate-related business risks and opportunities in future worlds (e.g. 2oC world) and time horizons (e.g. 2030). How – we use either our in-house scenario analysis model, or a third-party scenario analysis provider (depending on the scale of the portfolio). Output – graphical summary of climate risks and opportunities across the portfolio.
- Respond strategically to the risks and opportunities at firm level and across the investment portfolio, with mitigation and adaptation action to reduce exposure and improve resilience. How – analyse the risks and opportunities for each portfolio company and map the appropriate short-, medium- and long-term Output – a summary report of how to respond at firm and portfolio investment level.
At a wider level, where investments, whether equities or lending, may be spread across tens or even thousands of businesses or assets, Anthesis is skilled at undertaking cost-efficient, high-level portfolio assessments that seek to map climate change risks, identifying the key assets and issues of concern upon which to focus future mitigation and resilience strategies and how they can be implemented. This can involve reviewing client data and asset classes and building assessments based on sector and climate geographic reviews.
We help client’s strategise their climate change plans after analysing their climate risks and opportunities.Find out more about climate change strategies
I have worked with Anthesis for many years. They have a depth of ESG understanding and expertise, allowing real analysis and advice on the emerging issues that are becoming increasingly material to our clients. What sets them apart is their willingness and ability to apply this, together with technology solutions, to enhance the quality and speed of their reporting.
Partner, Latham & Watkins
We wanted the ESG screen as we were keen to understand the definition of ESG and to see the criteria you would be using. We were also interested to see how others would view us through this lens. The Anthesis screen provided us a with a “mirror”. The value to Neste was that it confirmed we are on a right track to addressing ESG issues. It also helped us to identify some potential improvement opportunities, several of which we are working on, and others that warrant further evaluation.
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Anthesis has offices in the U.S., Canada, UK, France, the Netherlands, Belgium, South Africa, Ireland, Italy, Germany, Sweden, Spain, Portugal, Andorra, Finland, Colombia, Brazil, China, the Philippines and the Middle East.