"Climate risks are missing in the ALM studies" says Willemijn Verdegaal to Fondsnieuws
Fondsnieuws has published an interview of Willemijn Verdegaal, Climate & ESG Solutions co-head, in which she shares her views on the changing dynamics of climate risks in investment decision-making.
Fondsnieuws, a Netherlands-based multimedia platform, is a leading source of information for professionals in the Dutch investment industry.
In her latest interview, Willemijn explains why even after committing to signing the Climate Agreement to reduce greenhouse gas (CO2) emissions by 49% by 2030 as compared to 1960, the financial sector has not made much progress in implementing them so far.
“We have to go back to the basics because the assumptions on which pension funds base their assets & liabilities management (ALM) study are incomplete. This is because climate risk is not included here, while this is a very important risk driver, as is now clear,” says Willemijn.
She also stresses the fact that climate risks, in most of the cases, have not been taken into account while making the investment decisions. The reason for this as she further explains is that “Strategic asset allocation is determined by econometrics models, which extrapolate historical data. However, climate change is not in the statistics of the past. What we are experiencing is historically unique.”
In March 2019, Ortec Finance launched the first-ever Systemic Climate Risk Scenario Solutions, which according to Willemijn, has so far enabled pension funds to incorporate climate risks into their investment decision making. What makes this solution unique, is its ability to “…integrate insights from climate science into a macroeconomic model,” describes Willemijn. She further adds “The central question is what happens when temperature rises? To what extent does productivity decrease? This information is calculated per country per year so that an adjusted economic growth path (GDP) up to and including 2100 is shown.”
Want to read the detailed interview? Read on here.
Systemic Climate Risk Scenario Solution
Ortec Finance has integrated quantified systemic climate risks and opportunities associated with different global warming pathways into traditional multi-horizon, real-world scenarios sets that drive strategic investment decision-making. Eager to learn more about the Systemic Climate Risk Scenario Solution? click here.