Environmental Alpha : Institutional Investors and Climate Change

by Calvello, Angelo

• ISBN13: 9780470290620
• ISBN10: 0470290625
• Format: Hardcover
• Copyright: 2009-11-02
• Publisher: Wiley

Summary

The definitive guide to how institutional investors should approach the risks and opportunities associated with climate changeEnvironmental Alpha provides institutional investors with the comprehensive framework they need to assess the risks and investment opportunities tied to climate change.Climate change will present institutional investors with some of the most important risks and opportunities they will face for generations to come. Climate change has the potential to affect many sectors in radically different degrees over time, and institutional investors need to have a thorough understanding of the multi-dimensional risks and opportunities that could influence nearly every investment in their portfolios. This volume is composed of contributions by leading experts in environmental investment, moving beyond the theoretical or academic nature of much of the current discussion on the topic to provide you with real-world insights into an emerging market. Examines the climate change-related drivers of returns (science, economics, policy, and technology) that make environmental alpha possible Explores fiduciary duty and climate change Contains in-depth explanations of each of the major categories of environmental investing and examines related environmental alpha opportunities Discusses practical implementation issues Presents real-world case studies and examplesClimate change will be one of the most important investment themes of the next twenty years; the related environmental investment opportunities will provide institutional investors with some of the greatest "alpha" opportunities for years to come. This book will put you in a better position to assess and access these opportunities.

Author Biography

Angelo A. Calvello is the founder of Environmental Alpha, a consulting firm that helps institutional investors develop climate change–based risk management and investment strategies. He has worked in the investment business for over twenty-five years, and writes and speaks extensively about environmental investing, alpha-centric investing, and alpha/beta separation. Dr. Calvello earned a PhD in contemporary European philosophy from DePaul University and a postdoctoral certificate in business from New York University's Stern School of Business. He is on the Chartered Alternative Investment Analyst (CAIA) Association Advisory Board, and is a member of the Chicago Quantitative Alliance and the Chicago Climate Futures Exchange.

Table of Contents

Foreword.

Preface.

Acknowledgments.

Introduction to Climate Change Issues and Consequences.

The Science of Climate Change

Human-Caused Climate Change: The Evidence

Other Human Influences on Climate

Challenges in Projecting Future Climate Change

Future Climate Change with and without Emissions Reductions

Summary

Notes

References

The Economics of the Climate Change Challenge

Considering the Case for Action

The Policy Framework

Summary and Conclusion

Acknowledgments

Notes

References

Climate Change Policy What Investors Need to Know

Overview of Policy and Policy Drivers

Why Investors Care About Policy

Climate Policy and Regulation: An Overview

Designing a Domestic Approach

The Impact of Other Policies

Designing an International Approach

Looking Forward

Summary: Implications for Investors

Acknowledgments

References

Climate Change and Institutional Investors: Key Strategic Issues.

Risks and their Impact on Institutional Investors

Four Categories of Climate Risk

Investor Engagements with Companies and Policymakers on Climate Risk Assessment and Disclosure

Investor Action on Climate Risk

Market Meltdown: Doom or Boon to Green Economy?

EIRIS Carbon Profile Case Study: Tools for Measuring Climate Risks

Acknowledgments

References

The Case for Climate Change as the Paramount Fiduciary Issue Facing Institutional Investors

The Freshfields Report

United Nations Principles of Responsible Investment

The Challenge of Climate Change

Business Risks and Opportunities

Energy and Insurance and Re-Insurance

Case Study: Insurance in a World with Climate Change (CShawn Bengtson

Conclusions

References

SRI or not SRI

A Missed Opportunity

After Awareness, Then What?

SRI or Not SRI?

The Limitations of Current Approaches

Leveraging Carbon BetaÖ in the Equity Space

The Carbon BetaÖ Model Itself

Whither Carbon Finance?

Acknowledgments

Notes

References

Environmental Alpha--The Investment Case for Climate Related Strategies.

Taxonomy of Environmental Investments

Climate Change: A Cluster Concept

The Drivers of Returns

Categories of Environmental Investments

The Risks and Challenges of Environmental Investing

Investments

Conclusion

References

Investing in Climate Change

Persistence of Climate Change as an Identifiable Source of Excess Returns

Fundamental Attributes of the Climate Change Universe

Applying Climate Change to Different Asset Classes

Benefits of Including Climate Change in Asset Allocation

Market Demand and Supply

Conclusion

References

Carbon as an Investment Opportunity

The Kyoto Protocol and Emission Targets

The Clean Development Mechanism and Joint Implementation

The European Union Emissions Trading Scheme

Emerging Carbon Schemes

Flavors of Carbon

Why Invest in the Carbon Space Today?

Carbon Will Be a Huge Market

Alpha, Information, and Resources

Conclusions and Outlook

Market-based Solutions to Reduce Emissions from Deforestation and Degradation (REDD)

Science and Policy

Market-Based Solutions

Conclusion

Notes

References

Liquid Alpha The Case for Investing In Water

The Impact of Accelerating Demand on Water Supplies

Structural Impacts on Water Supply

Impact of Climate Change

Investing in Water

Capturing Liquid Alpha

Risks to Investing in Water

Summary

Acknowledgements

Notes

References

Effective Clean Tech Investing

Classifying the Scope of Cleantech Investments

The Pace of Clean Tech Innovation and Future Prospects for Investing

Fitting Clean Tech Investments into an Effective and Diversified Portfolio

Conclusions and Implications

References

Sustainable Commercial Property

Background and Context

Buildings and Climate Change: A Global Challenge

Size of the Market for Sustainable Property

Sustainable Property Drivers and Barriers

The Investment Thesis for Sustainable Property

Sustainable Property Investment Opportunities

Future Trends and Risk: A Perfect Storm?

Notes

References

Practical Considerations

A Collaborative Response to Climate Change

Diaries of an Investment Consultant

Why Might a Collaborative Approach to Climate Change be Appealing

What are the Pitfalls of Collaboration?

A Collaborative Framework Applied to Climate Change

Collaboration in Action: Asset/Liability Modeling and Scenario Analysis

Conclusion

References

Corporate Responsibility and Environmental Investing

What is CR and Environmental Responsibility?

What Comprises an Asset Manager's Environmental Footprint?

What Role does ER (and CR) Play in a Corporate Entity's Business Model?

What ER Statement Should An Investor Expect From A Corporation?

An Investor's Approach to ER

Conclusion

Appendix: An Interview with Michelle Clayman of New Amsterdam Partners

References

Beyond Best Practices

Step 1: Understanding Climate Change and the Virtual Team

Step 2: Assessment (Environmental Stress Test)

Step 3: From Theory to Praxis

Step 4: General Observations

Case Study: Two Meanings of Stewardship

Conclusion

Notes

References

About the Author.

About the Contributors.

Index.

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