As climate risks intensify, investment analysis must rise to the challenge Addressing the challenge of integrating climate change dynamics into investment decision-making.

 

Key Insights

  • We believe climate change is set to have a material impact on investment performance across geographies and asset classes.
  • Data availability has historically been a notable headwind to analyzing climate change-related risks and opportunities.
  • While the challenges around climate data are not insignificant, the good news is that there is progress.

 

Written by


 

From the Field

Compelling opportunities for contrarian investors

Rate anxiety means utilities and high yield bonds offer value.

1 CAGR = Compound annual growth rate. It represents the consistent rate of growth had the indicator compounded at the same rate each year over the previous 10-year period.
2 This calculation refers to weighted average carbon intensity and applies the benchmark weighted average for greenhouse gas emissions/revenues.
3 The Greenhouse Gas Protocol recommends that a company should focus on which Scope 3 activities are expected to generate the most significant emissions and offer the most significant GHG reduction opportunities and are the most relevant to the company’s business goals. As a first step, companies should conduct a screening process using less specific data (i.e., industry average data). Next, each category should be examined to determine whether to further refine the emissions estimates.
4 The SBTi is a partnership between the Carbon Disclosure Project (CDP), the World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and the United Nations Global Compact. It provides companies with a clearly defined pathway to future‑proof growth by specifying how much and how quickly they need to reduce their greenhouse gas emissions.

Additional Disclosure

MSCI and its affiliates and third party sources and providers (collectively, “MSCI”) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Historical MSCI data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of November 2023 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types, advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. Actual future outcomes may differ materially from any estimates or forward-looking statements provided.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. There is no assurance that any investment objective will be achieved. All charts and tables are shown for illustrative purposes only.

T. Rowe Price Investment Services, Inc., distributor, T. Rowe Price mutual funds. T. Rowe Price Associates, Inc., investment adviser.

© 2023 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the Bighorn Sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

ID0006374 (11/2023)

202311-3159448