Evaluating physical climate risk for equity funds with quantitative modelling – how exposed are sustainable funds?

Sofia Wiklund

Journal of Sustainable Finance & Investment, 2023, vol. 13, issue 2, 893-918

Abstract: The effects of climate change carry substantial financial consequences. Despite this, physical climate risk has only sparsely been covered in previous research, particularly in the setting of investing. Investors' tools for managing physical risk are in general rudimentary and many rely on sustainability labels. This study compares physical climate risk exposure of three groups of equity funds labelled as sustainable with the general market. Physical climate risk was evaluated by quantitative modelling, incorporating first level of upstream supply chain. The results show a lower physical risk for all three groups of sustainable funds in a five- and ten-year horizon. It cannot be concluded whether the lower risk is a result of consideration in sustainability labelling, or if lower physical risk is correlated with other sustainability qualities. Further research on physical climate risk for investors is needed, not least from a quantitative perspective and on risks related to supply chain.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/20430795.2021.1894901 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:jsustf:v:13:y:2023:i:2:p:893-918

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TSFI20

DOI: 10.1080/20430795.2021.1894901

Access Statistics for this article

Journal of Sustainable Finance & Investment is currently edited by Dr Matthew Haigh

More articles in Journal of Sustainable Finance & Investment from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().