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Lauren Juliff and Henrik Wold Nilsen
White Papers 1 min read time

Climate Change Benchmarks: The Passive Pretenders

By Lauren Juliff, Head of UK Institutional, Climate & Sustainability Product Lead and Henrik Wold Nilsen, Senior Portfolio Manager
14. March 2023

There is no universally accepted metric for assessing company or portfolio climate risk, making climate index-creation subjective and opaque. There is no such thing as passive Paris alignment.

There has been an explosion in climate-aware indexes as investors respond to both regulatory and financial risks from climate change by replacing market-cap indices with new climate benchmarks in their passive portfolios.

There is no universally accepted metric for assessing company or portfolio climate risk, making climate index-creation subjective and opaque. This observation is being picked up in recent academic research and comments from the regulator.

The evolving nature of climate science, policy and data availability means that delivering a systematic portfolio aiming for Paris-alignment requires climate specialist expertise, oversight and accountability.

Systematic annual decarbonisation is not a robust standalone proof statement for 'Paris Alignment'. Climate benchmarks fail to appropriately manage the risks and offer the opportunities associated with the transition to a Paris aligned economy, and even introduce new, unexpected sources of risk.

Read the white paper here:

Climate Change Benchmarks - The Passive Pretenders.pdf

Date: 14/03/23

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