Portfolio Construction: Climate Risks

This lecture focuses on portfolio construction under climate risks, covering metrics for a portfolio, carbon factors, and decarbonization strategies. It explores carbon exposure measures, scopes for reporting emissions, and the market measure of carbon risk. The lecture also delves into avoided emissions, the construction of brown-green scores, and the BMG factor. It discusses multi-factor analysis models, carbon sensitivities across sectors, and the advantages and limits of the BMG approach. Additionally, alternative risk factors in the environmental pillar are examined, along with assessing the climate performance of a portfolio and building a decarbonized portfolio, illustrated with a case study on the Swiss National Bank's portfolio.