Ortec Finance, a leading provider of technology and solutions for risk and return management for institutional investors, has utilized its proprietary economic and climate scenarios to identify opportunities for private infrastructure investments, outlined in a joint whitepaper with the Global Infrastructure Basel Foundation (GIB).
The whitepaper highlights the financial benefits of sustainable infrastructure by quantifying its impact on a typical institutional investor’s portfolio under increased allocations to this alternative asset class, using two Ortec Finance Climate Scenarios. The first scenario simulates the impact on macroeconomies and asset class returns under a rapid, disorderly and financially disruptive transition whereas the second scenario models a limited transition, resulting in heightened physical risk exposure.
Sophie Heald, Senior Climate Specialist, Climate Scenarios & Sustainability team commented: “In the current landscape where physical risk remains as a dominant threat to institutional investments and achieving net-zero by 2050 is no longer realistic, it is becoming increasingly important to assess the vulnerability of investments - at asset class level - to these physical risks as well as their resilience to transition and market pricing-related climate risks.
Our analysis shows that for a typical institutional investor, a modest increase in infrastructure allocations led to improvements in portfolio returns. Furthermore, sustainable infrastructure holds an additional advantage over conventional infrastructure by being less exposed to physical, transition, and market pricing related climate risks.”
Koen de Reus, Head of Client Servicing, Climate Scenarios & Sustainability team added: “As the impacts of climate change on infrastructure portfolios vary widely across sectors and regions, it is important to evaluate its sensitivity to both transition policies and physical risks. My colleagues, Sophie, Tijmen and I are delighted to have collaborated with GIB on the emergence of sustainable infrastructure as an investible asset class, and to demonstrate a top-down approach to quantifying its consequences using our Ortec Finance Climate Scenarios.”
The full whitepaper which was recently featured on the World Economic Forum can be accessed here.
Contact
Sophie Heald
Senior Climate Specialist
Koen de Reus
Head of Client Servicing, Climate Scenarios & Sustainability