Publication / 11 Apr 2011

Taking Carbon Risk into Account

AXA Investment Managers used Trucost data to analyse the impact of carbon risk for investors.

The purpose of the research was to analyse the impact of carbon risk for investors on the European market in general and the UK market in particular. A classification of solutions for investors wanting to incorporate carbon risk, and thus climate risk, into their management strategy is also presented.


Starting from 2012, the European sectors covered by the carbon quota system of the EU ETS (Utilities, Building Materials, Oil & Gas, Basic Materials, Airlines, Maritime Transport) will be financially impacted by the entry into phase III. Moreover, other sectors are potentially and indirectly affected by an increased carbon cost, such as the Automotive, Capital Goods, Chemicals, or even the Food & Beverages sectors, a significant share of the “bottom line” of which is exposed to carbon risk.

Although the market is still struggling to incorporate the carbon risk that weighs indirectly on the economic fabric, with regard to the UK market, the “Low-Carbon” strategies constructed from direct GHG emissions have paid off over the past five years on average for most of the sectors most exposed to carbon risk. In addition, the volatility of these strategies is slightly lower.

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