Since 2021, we have been screening our portfolio regarding climate risks in broad terms, following the concept of 'dual materiality'. This allows us to assess, on one hand, the risks that climate change poses to our portfolio and, on the other hand, the impact our investments have on global climate change.
We evaluate our investments based on three aspects:
- Physical climate risk
→ the extent to which an asset is at risk of being affected by physical climate-related risks, such as extreme weather conditions, shifts in water supply, or temperature increases. The score for physical climate risk has three dimensions: climate-related hazards and exposure, vulnerability, and lack of adaptive capacity.
- Climate transition risk
→ the extent to which an asset faces specific risks linked to the transition to a low-carbon economy. The risk is determined by the type of vulnerable asset classes and the timing of exposure. The climate transition risk indicates the level of risk associated with decarbonizing the economy for a particular asset, based on macro trends and the dynamics of the national economy of its location.
- Climate transition opportunity
→ the extent to which an asset is well-positioned to manage the transition risks to a low-carbon economy. We perceive this as an opportunity, namely the ability to adapt to consequences and challenges. This indicator reflects the economic resilience during such a transformation based on four micro, meso, and macro-economic dimensions.
