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Making Sense
Market Matters | Data Assets & Alpha Group: Asset Allocation amid Climate Risks, with Fidelity Intl Macroeconomist
Jan 30, 2024
Anna Stupnytska, Global Macro Economist at Fidelity International, discusses the impact of climate change on growth, inflation, and interest rates. She explores the trade-off between transition and physical risks, the implications for asset prices and strategic asset allocation, and distinguishing 'signal from noise' in ESG data.
30:43
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Quick takeaways
- Climate change scenarios have a negative impact on global GDP growth, leading to higher inflation and interest rates with varying effects across regions and asset classes.
- Fidelity International's macroeconomic modeling incorporates climate change to stress test capital market assumptions, revealing negative impacts on long-term risk and return profiles, with equities being more sensitive than fixed income.
Deep dives
Climate Change Scenarios and Their Impact on Markets
Climate change scenarios, as defined by the Network for Greening the Financial System, have a negative impact on global GDP growth and lead to higher inflation and interest rates. However, the effects vary across regions and asset classes. Positive progress is seen in climate policies, particularly in the European Union with increased carbon pricing. The NJFS scenarios include orderly and disorderly transitions, hot house world, and too little, too late, each having different risks and outcomes. Incorporating climate change into investment decisions is crucial to avoid misguided return expectations and systemic financial disruptions.
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