Mitigate physical, transition and market pricing climate risks across multiple funds.
Addressing the UK’s pension industry’s climate risk exposure
Major reforms underway in the UK pensions industry are set to drive significant change and are likely to have far-reaching implications for Local Government Pension Schemes (LGPS).
From a climate change perspective, an LGPS’s choice of climate risk management tool will materially influence its overall approach to identifying climate risks and opportunities across expanding asset classes, developing resilient strategies for stable long-term returns, and adhering to the reporting obligations of each individual partner fund.
Manage the financial impacts of climate change
ClimateMAPS - Ortec Finance’s proprietary top-down climate scenario analysis solution, has been helping pension funds worldwide since 2018 to quantify climate risks and opportunities across macroeconomies, sectors and all asset classes. It provides detailed insights to help pension funds understand how climate change may impact their portfolios’ short- and long-term returns, and can be integrated with traditional risk analysis and asset liability management platforms, such as GLASS, Ortec Finance’s asset liability management solution.
Utilize ClimateMAPS to:
- Understand the financial impacts and outcomes under different climate scenarios, including Ortec Finance Climate Scenarios and NGFS climate scenarios
- Integrate climate change into investment beliefs, capital allocation, strategic asset allocation and the selection and monitoring of investments
- Assess and mitigate climate risks within broader risk management frameworks
- Adhere to climate-reporting and disclosures and undertake stakeholder engagement
- Assess optimized portfolios, tailored to each fund’s specific funding ratio and baseline, against a range of climate scenarios
This framework supports partner funds by providing in-depth analysis and comprehensive climate risk management tailored to their specific investment strategies and portfolios.
Strengthen the investment process with top-down climate scenarios
ClimateMAPS harnesses Ortec Finance’s proprietary Economic Scenario Generator to assess risks, combining real-world financial dynamics with an assessment of physical and transition risks. This robust methodology delivers quantitative and qualitative insights across macroeconomies, all asset classes, conventional and green benchmarks, as well as regions and sectors.
The Ortec Finance Climate Scenarios are designed to inform investment strategies by addressing the insufficient pricing of climate risk through:
- Assessing the implications for future asset values, including the risk of stranded assets
- Exploring portfolio-wide cascading effects, driven by market sentiment and potential overreaction
- Evaluating how impacts may vary, depending on the timing and velocity of financial market responses
Meet different stakeholder needs with comprehensive insights
ClimateMAPS contains a wide range of outputs and deliverables to help support LGPS pools to assess and communicate results to a wide range of stakeholders, including:
- Economic variables for 20+ countries/regions, 450+ financial variables across all asset classes, including green benchmarks
- 30+ sector-specific impacts for equities and geographical insights
- Dataset to facilitate a comprehensive total portfolio analysis for partner funds
- In-depth breakdown of transition, physical and market pricing risk for all macroeconomic and asset class impacts, and supplementary analytics to reflect extreme shocks
- Access to an interactive web-based tool featuring dynamic charts, videos and explanations for comparison, with ongoing support and training
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Climate risks facing the Top 30 UK pension funds
The Climate Scenarios & Sustainability team recently conducted an assessment to compare the climate risk exposure and resilience of the Top 30 UK pension funds by quantifying the impacts of their portfolio at an asset class level under the 2024 Ortec Finance Climate Scenarios.
Access the report
A range of comprehensive solutions for LGPS’s investment decision-making and reporting needs
Ortec Finance offers several solutions for LGPS pools facing the challenges of reform. By leveraging advanced models and technology we empower pools to navigate the complexities introduced by the upcoming UK Pension Scheme Bill. While ClimateMAPS identifies systemic climate risks and opportunities using top-down climate scenarios, PEARL helps to measure and understand the added value of investment decisions from multiple perspectives and GLASS supports strategic risk management, asset allocation and asset and liability management.
Contact us to learn more
Contact
Koen de Reus
Head of Client Servicing, Climate Scenarios & Sustainability