AB’s new white paper, “Climate Change Scenario Analysis—A Practical Guide for Equity Investors”, explains in detail how Australian investors can develop a range of climate scenarios based on current climate science and apply them to assessing climate risk for particular industries, individual stocks and the Australian share market as a whole.

While scientifically based, AB’s methodology is proprietary and screens-out data “noise” which can render many of the available off-the-shelf scenarios unsatisfactory. We have already received feedback from companies we analyse that our approach is helping them to meet the reporting recommendations of the Taskforce for Climate-Related Financial Disclosures, and we expect that investors will benefit in the same way. More than that, however, our methodology involves engaging with the boards and management teams of the companies in which we invest—a process that, while yielding unique and original research insights, can also help companies to change their behaviour in ways that can mitigate climate risk. Finally, the methodology extends to portfolio construction, thereby touching all points of the investment process.

As the paper notes, climate risk means that the future of investment will be different, “…and there are no road maps from the past. To get there, we believe that it’s important to start the journey now and to keep going, staying ahead of the market with research-driven, investable insights.”