Our asset management’s largest climate-related financial risks and opportunities are believed to lie in the transition to a low-emission society. Climate policy and regulations, more rigorous emission requirements, a changed cost structure and market preferences may affect our investments.
Storebrand Asset Management stress tested its investments through the 2 Degrees Investing Initiative scenario analysis tool PACTA in 2019. Transitional risk was mapped through exposure to high and low carbon technologies in the most important sectors, including fossil fuels and electrification in the transport sector. The results indicate how our investments are influenced by different scenarios, compared to reference portfolios.
The main impacts of scenarios indicating successful climate action policy, are:
Low returns from companies that are not able to adapt to a low carbon economy, such as the risk of stranded assets in the short to medium term.
Storebrand is not able to meet increasing customer demands for green investments. If Storebrand does not invest enough in green companies, there could be a reputational risk that may affect our market position.
The main impacts of the second scenario, late transition, are:
Low absolute returns and financial instability due to climate related issues.
Solution companies and projects are priced too high in the short term, creating a valuation bubble that may burst in the medium to long term.