“Carbon Delta is excited to collaborate with Ortec Finance in today’s launch of their climate-savvy ALM/SAA pilot project. We believe that the Ortec team is well equipped to increase climate change awareness amongst asset owners and are actively supporting the process. Plus, as Carbon Delta’s climate change risk and opportunity analysis is typically delivered at a security level and over a 15 year time horizon, this collaboration gives us the interesting opportunity to aggregate our data and view it over a longer time horizon, then compare the results to other models in market run by academic institutions.” – David Lunsford, Co-Founder of Carbon Delta
The goal of the project
The pilot is one of the first efforts of its kind to integrate quantified risks associated with climate change into standard forward-looking financial scenario sets that drive strategic investment decision making. The pioneering investors involved in the pilot will use these sets to analyze the impacts of various global warming pathways on their ALM/SAA. The pilot is expected to run until the end of 2018. If successful, the climate-savvy-scenario set is expected to be made more widely available by early 2019.
The pilot project is a broad collaboration between AP1, ASR, Philips Pension fund, PME, OPTrust, Ortec Finance and leading academic institutions, namely: Cambridge Econometrics, Carbon Delta, CICERO, Potsdam Institute for Climate Impact Research and is further supported by the Institute for Environmental Studies – VU Amsterdam, London School of Economics, Radboud University, Sustainable Finance Lab Utrecht and the University of East Anglia.
The Research & Development project, linking scientific climate data to ALM/SAA tooling, is a novel approach to mapping potential future climate impacts on investment performance. The pilot combines existing academic research on climate-related risks associated with several global warming pathways and maps these to key macro-economic risk drivers (growth, inflation, interest rates). The results of this mapping will be integrated into Ortec Finance’s forward-looking financial scenario set that already includes a wide array of standard financial and economic variables. Piloting investors’ portfolios will be tested using these new climate-savvy financial scenario sets as the key input for the adjusted ALM/SAA analysis.
The resulting insights will increase the piloting investors’ understanding of the sensitivities of their investment strategies to climate-related risks. Additionally, the pilot aims to inform academia of existing knowledge and data gaps to tailor future research to the financial sector practitioners’ needs.
Carbon Delta, an award-winning Swiss fintech, calculates and analyzes the risks and opportunities that climate change poses for investment portfolios. With their newly developed financial metric, called “Climate Value-at-Risk”, institutional investors can measure and assess climate impacts within portfolios. To carry out complex calculations on over 20,000 listed companies, Carbon Delta cooperates with the renowned Potsdam Institute for Climate Impact Research (PIK) and ETH Zurich. The startup has been supported by the EU initiative Climate-KIC and won their “Best European climate startup” award in 2016.
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