The scorecard reflects increasing market interest in understanding the exposure of investments to a range of carbon indicators. Understanding carbon risks and their potential financial impact is crucial if we are to avoid sudden and inconsistent write-downs of assets and redirect capital toward activities that are aligned with global climate commitments, hence it is now considered best practice to report on portfolio exposure to carbon even in markets where guidance is lacking.
A new metric has been added this year: carbon price risk exposure. This metric, developed by Trucost, helps investors understand how companies, and ultimately portfolios and indices, are exposed to the risk of governments imposing a price on carbon emissions. And for the first time, the 2018 Carbon Scorecard assessment includes two fixed income benchmarks in addition to the usual 10 equity benchmarks, providing a broader perspective on the carbon exposure of global financial markets.