Broadstone, an independent financial services consultancy, has partnered with Ortec Finance to integrate climate scenario modelling into its ESG Advisory services.
This collaboration aims to help asset owners including pension schemes, insurers, banks, and fund managers better understand the financial implications of climate change on their portfolios and balance sheets.
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The integration of Ortec Finance’s modelling framework will enable Broadstone to measure, monitor, and manage financial materiality, a key factor in assessing the risks posed by climate change.
Furthermore, as double materiality, the evaluation of both financial and effect materiality, becomes more and more important in global sustainability reporting frameworks, this project makes sure that asset owners have the resources they need to deal with the changing regulatory and economic environment.
Professor Jim Skea, the Intergovernmental Panel on Climate Change’s (IPCC) Climate Chief, has warned that if urgent action is not taken, the world would rise by 3°C above pre-industrial levels by 2100. The prospect of limiting warming to 1.5°C is now deemed increasingly unlikely.
In response, regulators and asset owners are prioritising financial materiality studies to better understand the physical and transition risks linked with climate change.
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By GlobalDataBy using climate scenario modelling, Broadstone’s clients can quantify macroeconomic changes and evaluate how various climate scenarios may impact asset class returns. This helps inform investment strategies and supports institutions in mitigating risks linked to a changing climate.
Deon Dreyer, investment director at Broadstone stated: “Climate change has the potential to cause significant economic disruption and asset owners will need to assess the financial impact from potential economic scenarios, and their impact on the environment. We are confident this solution will prove invaluable in helping asset owners navigate this.”
Marc Devereux, head of investment consulting at Broadstone, added: “Climate scenario modelling is critical to helping asset owners understand how climate change may impact their investment portfolios. Broadstone’s new offering in the UK market will help improve access for firms of all sizes to Ortec Finance’s award-winning service so institutions can begin to make the necessary adaptations to their investment strategy.”
