Scientific Beta “Upgrading Climate Scenarios for Investment Management”
Presentation of the Partner
About Scientifc Beta
Scientific Beta aims to be the first provider of a smart factor and ESG/climate index platform to help investors understand and invest in advanced factor and ESG/climate equity strategies. Established by EDHEC-Risk Institute, one of the top academic institutions in the field of fundamental and applied research for the investment industry, Scientific Beta shares the same concern for scientific rigour and veracity, which it applies to all the services that it offers investors and asset managers.
On January 31, 2020, Singapore Exchange (SGX) acquired a majority stake in Scientific Beta. SGX is maintaining the strong collaboration with EDHEC Business School, and principles of independent, empirical-based academic research, that have benefited Scientific Beta's development to date. Since 2015, Scientific Beta has also been offering highly advanced strategies in the area of ESG and climate change, whether involving options integrated into smart beta indices or pure ESG or climate benchmarks.
As a complement to its own research, Scientific Beta supports an important research initiative developed by EDHEC on ESG and climate investing and cooperates with V.E and ISS ESG for the construction of its ESG and climate indices.
Presentation of the Partnership
Objectives
The Scientific Beta “Upgrading Climate Scenarios for Investment Management” research chair at EDHEC-Risk Climate Impact Institute is a new long-term research effort, part of the EDHEC-Scientific Beta Advanced Climate Investing Initiative, which aims to address the pressing need for fit-for-purpose tools to integrate climate risks into investment management.
While climate change increasingly becomes a tangible reality, with more frequent and severe extreme weather events, the bulk of damages to nature, people, and economies remains in the future. This makes historical data and traditional statistical estimation methods largely irrelevant to assess and manage climate risks and explains why climate scenario analysis and stress testing have taken central stage in the investor toolbox.
In their current state however, they are rather crude what-if tools suited to assisting long-term strategic thinking about uncertainty and spotting fragilities to potential shocks. Considerable work is required to extend and repurpose climate scenarios for risk and investment management purposes. The critical challenge is to embed scenario analysis in a coherent probabilistic framework, enabling finance professionals to compute relevant risk and return metrics.
EDHEC-Risk Climate Impact Institute Scientific Director Professor Riccardo Rebonato will lead the research effort. A nuclear physicist by training, Professor Rebonato has made notable contributions to quantitative portfolio theory and risk modelling and management and has held senior research positions in the financial industry.
[Press release announcing the launch of the research chair: 02/10/23]
- EDHEC Outputs
How Does Climate Risk Affect Global Equity Valuations? A Novel Approach, July 2024, EDHEC-Risk Climate Publication
Riccardo Rebonato, Dherminder Kainth, Lionel Melin
Press release announcing the publication of the research: 10/07/24
- Academic Outputs
The Impact of Physical Climate Risk on Global Equity Valuations, SSRN
Riccardo Rebonato, Dherminder Kainth, Lionel Melin
- Professional Outputs
Sizing Up the Climate Threat to Global Equity Values – A Novel Approach?, Feature originally published in the July newsletter of the Institute.
Riccardo Rebonato
Assessing the Impact of Climate Risk on Global Equity Valuations, Webinar held on July 2, 2024.
Speaker: Riccardo Rebonato, Moderator: Felix Goltz
How can strategic investors deal with climate uncertainty?, article originally published in the Spring 2024 issue of EDHEC Research Insights published in Investment & Pensions Europe supplement and Pensions & Investments supplement.
Riccardo Rebonato
Interview: Climate Risk Integration: A Global Investor Concern, published in the February 2024 newsletter of EDHEC-Risk Climate Impact Institute. In this interview, Felix Goltz discusses the integration of ESG in factor investing, the pivotal role of academic research and the important insights gained over the years, the strategic shifts in research themes to meet investors' evolving needs, the rationale behind Scientific Beta's climate index series, and the Scientific Beta and EDHEC-Risk Climate Impact Institute research chair established recently to further research into climate risk modelling.
Felix Goltz, Research Director at Scientific Beta
About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 15 business schools. Fully international and directly connected to the business world, EDHEC commands a strong reputation for research excellence and the ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching is inspired by its research work and a focus on “learning by doing”, all with the aim of equipping people with the skills to succeed in business.
