Sample interview questions: How do you assess the impact of climate change on investment portfolios?
Sample answer:
Assessing the Impact of Climate Change on Investment Portfolios
As an Investment Manager, evaluating the impact of climate change on investment portfolios is crucial for maintaining long-term sustainability and financial performance. Here’s how I assess it:
1. Physical Risk Analysis:
- Extreme Weather Events: Quantify the potential financial impact of hurricanes, floods, droughts, and wildfires on portfolio assets.
- Sea Level Rise: Determine the risk exposure of coastal properties and infrastructure to rising sea levels.
- Resource Scarcity: Assess the investment risk posed by potential shortages of water, energy, and other resources due to climate change.
2. Transition Risk Analysis:
- Carbon Transition: Evaluate the financial implications of transitioning to a low-carbon economy, including stranded asset risk and opportunities from clean energy investments.
- Regulatory Changes: Analyze potential regulatory changes aimed at reducing greenhouse gas emissions and their impact on different sectors and companies.
- Consumer Preferences: Assess the shift in consumer preferences towards environmentally sustainable products and services and its impact on portfolio companies.
3. Scenario Analysis:
- Climate Models: Use climate models to project future climate change scen… Read full answer