The Covid-19 crisis highlighted the importance of combating climate change. Containment measures taken in most countries brought activity to a standstill for several months, resulting in a significant drop in CO2 emissions worldwide. Between January 1 and April 30, carbon emissions were 8.5% lower than in 2019. However, the drop in CO2 emissions over the year would be just enough to keep within the limits of 1.5°C global warming by 2100 (Novethic, 2020[1]).
There is still a long way to go to meet the threshold set by the Paris Agreement. Transition risk assessment is therefore a key measure in the climate strategy of institutional investors, to manage the financial impacts resulting from the effects of implementing a low-carbon trajectory.
Through an in-depth study of institutional investors' climate reports published in the context of Article 173 of the French Ecological and Energy Transition Act, we have noted this year a greater willingness on the part of institutional investors to take into account the transition risk to which the assets making up their portfolios are exposed. In the 2019 financial year, 25 of the 32 institutional investors we analyzed mentioned that they were taking transition risk into account in their strategy, i.e. twice as many as last year.
Our study reveals that :
Last month we carried out a study on how to take physical risk into account. physical risk by institutional investors. The following study focuses on the second family of climate risks, namely transition risks.
