PT  - JOURNAL ARTICLE
AU  - Apostolos Apostolou
AU  - Michael G. Papaioannou
TI  - Integration of Environmental Factors into Portfolio Risk Assessment
AID  - 10.3905/jesg.2021.1.028
DP  - 2021 Aug 31
TA  - The Journal of Impact and ESG Investing
PG  - 74--91
VI  - 2
IP  - 1
4099  - https://pm-research.com/content/2/1/74.short
4100  - https://pm-research.com/content/2/1/74.full
AB  - The financial sector collectively cannot hedge all climate-related risks, and investors individually are unlikely to affect climate developments significantly. However, the financial sector can help channel savings into green projects and thus facilitate divestment from heavy-carbon-footprint producers. This article provides a novel framework for understanding climate-related adaptation, mitigation, and transition risks and outlines a method for valuing these risks in institutional investor portfolios. The authors’ proposed setup serves as a continuous call to action to long-term institutional investors to obtain accurate information on climate-related risks and develop appropriate frameworks for understanding these risks, regularly valuing them, and properly incorporating them into their investment decisions.TOPICS: ESG investing, tail risks, portfolio management/multi-asset allocationKey Findings▪ This article provides a novel framework for understanding climate-related adaptation, mitigation, and transition risks.▪ It outlines a method for valuing climate-related risks in institutional investor portfolios.▪ It stresses the importance of integrating environmental factors in portfolio risk assessment by obtaining accurate information on climate-related risks and developing appropriate frameworks.