A large Canadian institutional investor approached BNY Mellon, requesting they provide improved transparency to retail stakeholders around the investment impact of climate risk.
With more than 100 climate models in current use, and over 17,000 variables to monitor, stress test and analyse – and then measure and rate these risks for specific holdings in a portfolio or fund – is arduous and complex. The best approach requires a willingness to examine all potential scenarios, made possible by two elements:
- Robust ESG data
- AI-enabled analysis of the enormous amounts of information on climate risks as they affect economic sectors, regions, and even individual companies.
BNY Mellon consulted with RiskThinking.AI to apply their proprietary tools and platform (ClimateWisdom™; Climate Risk Classification Standards – CRCS™) for a comprehensive climate risk analysis of the BNY Mellon Global Infrastructure Dividend Focus Fund – to answer three fundamental questions:
- What is the impact of companies doing nothing to change their current practices?
- What are the areas in which a portfolio manager should engage?
- How can the portfolio manager best serve investors’ interests in this process?