Risk Wire: Climate Change – The Cost of Transition

We have integrated the available industry-level climate change transition research from multiple sources and included climate change transition as the fourth long-lasting trend in Mira ABM*, along with automation, ageing population and globalisation/trade conflicts.

 

The transition of our economy in response to the climate change has begun in the earnest and is likely to continue in the years to come. The ultimate physical impact of climate change is arguably still uncertain, not least because it depends on the speed and extent of the policy reaction of major countries. Yet, there are energy transition facts that are already having significant impact on global supply chains, economic development and consequently, on asset pricing. Most importantly, these transition facts will continue to have impact on asset pricing in the foreseeable future, which qualifies climate change as the fourth long-lasting trend included in Mira ABM – our strategic asset management platform, along with ageing population, automation, and globalisation/trade conflicts.

 
Attempts to account for climate change in asset pricing so far have been focused on top-down macroeconomic analysis. Such analysis often misses the complexity of the underlying supply chain shifts. At the same time, there are detailed industry-specific studies covering climate change; however, they are fragmented and focused on individual industries. In this report, LINKS have tried to combine the body of knowledge on climate change from multiple industries into a single supply chain picture and draw conclusions with respect to asset prices.

 

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