Important topic. A few additional points that institutional investors should consider:
- The stock market is not the economy. Investors need to consider how climate affects corporate earnings, not just GDP.
- Impacts need to be disaggregated by sector and geography.
- What are possible impacts on discount rates as a result of monetary policy or various risk premiums? These can affect liabilities and present values.
- Uncertainty should be stress tested through higher volatilities in risky asset classes. Correlations could be impacted as well.