A MATERIAL RISK
Climate change is quickly becoming a key driver of asset class pricing.
Estimates suggest that physical climate change impacts could lead to over a decade of lost economic growth. The size of the Indian economy could be cut by over a third by 2050; Many Middle Eastern economies could see the size of their economies cut in half. If the climate transition accelerates, carbon intensive industries face a significant hit to revenues.
A MULTI-DECADE INVESTMENT OPPORTUNITY
At the same time, the scale of the necessary green transition presents a multi-decade investment opportunity – worth around $4-5 trillion per year.
Understanding the climate interactions between economics, technology, policy and markets will become critical for investors in the decades ahead.
WHAT WE OFFER
CLIMATE SCENARIO PLANNING
We assess a range of plausible climate transition paths, estimating the likelihood of each one. We judge their impact on growth, inflation, and asset class, market and sector returns.
INVESTMENT THEMES
Climate change will create winners and losers across sovereign debt, energy, metals, agriculture and equity sectors. These range from the clean technologies that could displace fossil fuels, to the metal commodities that they will require.
We present investment ideas geared to a variety of timeframes, from long-term secular themes to shorter-term, policy-related plays.
GLOBAL CLIMATE DATABASE
Quantifying the top-down impact of climate change on
macro and markets is fundamental to what we do.
Clients can subscribe to a suite of charts and proprietary top-down climate indicators, covering 67 sovereigns, 50+ sectors and sub-industries and a range of commodities and other real assets.
RECENT RESEARCH
Our weekly research notes analyse climate change through the lens of an investor, in six groupings: equities, fixed income, commodities, macro, policy and investment strategy
Markets
Three Climate Impacts on Portfolios Today
Consensus projections for reaching net zero emissions have been pushed back from 2060 to the mid-2070s. This is consistent with a 2°C global warming outcome, revised up from 1.8°C, and closer to our own 2.3°C projection.
Three Climate Impacts on Portfolios Today
Investment Themes
Investing in the Water-Flood-Energy Nexus
Most portfolios are ‘short’ physical climate change risk, because the negative impact of rising temperatures would hurt performance. Investing in water and food
systems presents the best opportunities to hedge that risk.
Investing in the Water-Flood-Energy Nexus
Long Run Returns
Climate Equity & Debt Long-Run Impacts
In Part 1, we looked at climate change’s impact on long-run growth, inflation and cash returns, concluding that the global economy could experience low growth & high inflation. This week we look at fixed income and equities.
Climate Equity & Debt Long-Run Impacts
OUR TEAM
Our team has a combined 30 years of experience working for institutions on both the sell side and buy side in London and New York. We work closely with ASR economists and strategists to leverage the best ideas across all disciplines of research.
Michael Penn
Head of Climate Macro Strategy
Michael is Head of Climate Macro Strategy, advising investors on how to integrate climate change and natural capital into long-term macroeconomic views, strategy and asset allocation. He is based in London. Prior to joining Absolute Strategy Research, Michael was the Chief Economist and Strategist at Cohen & Steers, a Real Asset fund manager located in New York. The firm manages $100bn in assets. He was a member of the Asset Allocation Strategy Group, with a primary focus on integrating macro strategy views into positions on Infrastructure, Real Estate, Commodities and Natural Resource Equities. He spent ten years at the firm. He previously held macro strategy and economics research positions at Merrill Lynch, both in New York and London. Michael holds a Master of Science in Economics with Distinction from University College London, and a Bachelor of Science in Economics from the University of Nottingham.
Michael Hessel
Senior Climate Macro Strategist
Michael has spent a decade at Absolute Strategy Research covering policy, political risk and long-term thematic research for institutional clients. His Climate Macro strategy research areas of focus are on global climate policy, the clean energy transition and the role of technology. Michael studied at the University of Edinburgh.
'CLIMATE-AWARE' INVESTMENT STRATEGIES
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