As an investment management business AMP Capital's focus involves understanding how the complexities of climate change may impact upon our company operations, corporate reputation, the marketplace (product demand), how we respond to emerging regulatory, policy and disclosure requirements and most importantly how we manage economic transition and physical risks relating to our client's investments and portfolios.
As an investment manager AMP Capital will consider climate risks when managing investments on behalf of underlying investors. For AMP Capital's investment activities risks and opportunities related to climate change are manifested as a risk to returns of the listed and unlisted companies, property, infrastructure and fixed income instruments in which AMP Capital invests on behalf of its clients. Where a degree of certainty exists on the nature of climate change related opportunities, regulatory and other risks (e.g. pricing, physical impacts) asset classes potentially most affected have undertaken scenario analysis to assess the materiality of financial impacts (e.g. carbon price impact on earnings, value at risk or asset valuations).
AMP Capital undertakes extensive investment research and assessments of climate change risks to its managed investments through its existing Environmental, Social and Governance (ESG) frameworks. Our analysis is undertaken by in-house ESG specialists who have been analysing climate change risks for well over a decade. This analysis typically includes consideration of carbon regulation, direct and indirect costs, geographic exposure to climate policy, capacity of businesses and assets to adapt and manage risks, and transitional governmental assistance programs. This enables assessments of company and portfolio exposures to climate change, including potential risk of stranded assets. This is shared with investment teams to enhance decision-making as well as longer term asset management strategies. Updates may also be provided as required to AMP Capital's Investment Committee who has overall responsibility of management of investment risks.
Where such impacts are considered material, AMP Capital may adjust its investment in a particular sector, company or asset or, for example, vary the weightings of the stock within a particular portfolio. Potential impacts (rising electricity prices, price on carbon) and longer-term risks (e.g. physical, weather related impacts and stranded assets) have also been considered in relation to property and infrastructure investments. Equally, there are new and growing opportunities to cater for increasing demand for low carbon investment products and profiles from individual and institutional investors.