Climate Transition Value-at-Risk

The transition to net zero is already underway and will require structural changes right across the economy. Investors are increasingly at the forefront of these changes as they allocate capital to support the transition. Asset Managers and the portfolios they manage for their clients are key to this global economic transformation.

However, there isn’t one single transition pathway to global net zero. The speed and impact of the transition will differ across regions and sectors. Deep and rapid decarbonisation will be required in some sectors, while others might require huge capital investments in new technologies. Some companies will cease operating unless they can adapt their business models, while others may flourish, or entirely new industries may emerge.

Even as regulators increase requirements for investors to report emissions and disclose climate-related risks, Asset Managers often lack access to robust data and metrics to help them decarbonise portfolios in a way that reduces global emissions, while meeting their fiduciary duty to clients to manage financial risk and capture the opportunities of the climate transition.

We now offer five different products in the market that are based on Climate Quantified™ Transition, WTW’s proprietary analytics to measure transition risk:

• Research platform: Access to the Butterwire climate risk analytics tool, including automatic updating, portfolio construction and evaluation tools, and access to fixed income analysis.
• Transition risk data: Provision of CTVaR data set available for enterprise & equity valuation for more than 7,000 companies.
• The Climate Transition Index: WTW’s Climate Transition Index (CTI) launched with partners Qontigo and a $1bn fund that gives investors access to a passive equity solution.
• Bespoke solutions: Creation of scenarios and analytical tools tailored to client needs.
• Consulting services: Development of research and analysis for the client on specific climate investment issues at the country, industry, commodity, or portfolio level.

Insightful analytics

At the heart of our climate transition analytics is a standard financial metric based on future cashflows. We believe our approach is more insightful than other metrics because we calculate Climate Transition Value-at- Risk for each operating asset or line of business, enabling investors to identify the opportunities of the net zero transition.

Coverage & credibility

Our models are subject to rigorous quality control and have been developed over more than a decade to cover the financial impacts of transition in all regions across 30 commodities and 500 products, services and sectors outside of commodities. Corporates, countries and investors are already using CTVaR to help assess their exposure to transition risk and identify opportunities.