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The Risk & Return of SEI Metric Equity Portfolios

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The Risk & Return of SEI Metric Equity Portfolios

There is a general consent that the consequences of climate change do not only affect our environment but will also impair the productivity of the global economy, in particular a number of sectors highly vulnerable to the global transformation e.g. automotive, energy. If this assumption holds true, investments into conventional assets would signify a higher risk for all kinds of investors. Thus, there is a natural interest to compare the risk / return profiles of conventional portfolios with those consistent with a 2 °C scenario. This will help to understand how risk and return patterns will shift and facilitate improved investment strategies.

This report shows that climate-related risks in the investment portfolios could be mitigated at a small price, if any at all in an example of a more consistent portfolio in the back-testing period. Results indicate that there is no observed trade-off between climate impacts and risk-adjusted returns between the 2 °C screened portfolio and the MSCI World portfolio taken as benchmark.  In addition, our analysis shows the difference of climate impacts between the 2 °C screened portfolio and the MSCI World portfolio in terms of their 2 degree consistency.

Details

Author: 
Dr. Anne Michaels, Prof. Dr. Ulf Moslener, Menglu Zhuang
Release date: 
February, 2018
Number of pages: 
37
Type: 
Reports
File size:
927.13 KB