Dr. Maddela Prasanthi
Abstract
As the climate becomes increasingly unpredictable, investors face a crucial challenge: building investment portfolios that can withstand the risks of climate change while seizing opportunities in the shift to a low-carbon economy. This paper offers a detailed framework for creating and managing investment portfolios designed to be resilient to climate risks. Our approach centers on integrating climate risk assessment and scenario analysis into strategic asset allocation. We delve into why this is essential, examining how different types of climate-related risks—such as physical risks, transition risks, and liability risks—can influence investment performance. The paper provides a clear, step-by-step guide for embedding these considerations into every stage of portfolio management, from initial risk evaluations to continuous monitoring and periodic adjustments. The ultimate aim is to empower investors with practical tools and actionable insights to tackle the challenges of climate change while pursuing sustainable, long-term returns. (Guyatt, 2011) (Toimil et al., 2019) (Reboredo et al., 2019) (Simpson et al., 2021)
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Published: July 2025 [Vol. 08, No. 07]