Hills Sustainability
THEME: SUSTAINABILITY
16 April 2024 Article

Climate Data in the Investment Process: Challenges, Resources, and Considerations

  1. Andres Vinelli
  2. Deborah Kidd, CFA
  3. Tyler Gellasch
Climate-related data are critical to assessing and managing the financial risks and opportunities posed by climate change, yet the data are often inconsistent and unreliable. We discuss how regulations to enhance transparency are evolving and suggest how investors can make effective use of the data available to them.
Climate Data in the Investment Process: Challenges, Resources, and Considerations View PDF
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Report Overview

Climate change is impacting the world in profound ways, driving extreme weather events and posing increasing risks to human life, infrastructure, and ecosystems, with the direct impacts falling inequitably among different geographies and demographics.

To mitigate the most severe impacts, experts argue that global warming must be limited to less than 1.5 degrees Celsius (above pre-industrial global temperature levels), and the world must transition to net-zero greenhouse gas (GHG) emissions by 2050. Achieving this transition will require significant capital investment.

“Climate-Related Data in the Investment Process: Challenges, Resources, and Considerations” aims to answer three increasingly imperative questions regarding climate-related data and investing:

  1. What type of climate-related information is used in the investment process, and where can an investor get the data?
  2. What are the risks and limitations of using climate-related data, and how can an investor navigate these?
  3. How will current and forthcoming disclosure regulations and standards help with data transparency, reliability, and comparability?

Governments, companies, banks, insurers, asset owners, and asset managers are all taking steps to address climate-related risks and opportunities. Central to the efficacy of their efforts is the availability of reliable climate-related data to measure and analyze these risks and opportunities. But there are challenges associated with obtaining high-quality data, including inconsistencies, lack of transparency, and varying methodologies. As we discuss in this report, different types of data, including raw, processed, and analyzed data, are used for various purposes.

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