Investors must adapt to the growing uncertainty surrounding delayed global climate transitions by incorporating dynamic scenario analysis tools. According to abrdn, annual updates to these tools are essential to account for evolving policies, technologies, and market conditions. This approach empowers investors to identify climate-related risks and opportunities more effectively, enhancing long-term decision-making.

Abrdn has developed a four-year climate scenario framework. The latest findings show that while climate policy ambitions increase, the implementation is delayed. Furthermore, they found that climate risk is both a sector-specific and stock-specific phenomenon. “But dispersion within sectors is the most pronounced feature, providing an opportunity for actively managed strategies to tilt portfolios towards
climate-transition winners and away from losers”, the report states.

Read the full paper here.