Your expert for questions

Gunther Dütsch

Gunther Dütsch
Partner, Sustainability Services at PwC Germany

Your concerns

What climate change means for investors

From the EU Action Plan to the Carbon Disclosure Project and the Principles for Responsible Investment (PRI), the financial industry is increasingly regulated. All regulations have one thing in common: they require financial institutions to systematically integrate scenario analyses into existing processes in order to test the resilience of the business model.

For investors, the question is not only how to comply with these regulatory requirements. They also face the task of translating the financial implications of different climate scenarios into their risk and opportunity management and understanding their material drivers.

Investors face these questions

  • For which portfolios is the financial materiality of climate risks and opportunities highest?
  • How do risks and opportunities differ across different scenarios?
  • How can the risks and opportunities be explained?
  • What are the key drivers of performance based on a holistic modeling approach that looks at more than just CO2 prices?
  • Are these drivers based on sectoral or regional positioning or are the results strongly influenced by individual companies?

Our offer

This is what Climate Excellence offers investors

  • You can use the scientifically and internationally recognized scenarios of the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA).
  • For transitory risks:
    • You can currently choose from three transition scenarios and two physical scenarios. These will be added to and expanded on an ongoing basis.
    • The module covers all listed companies worldwide as well as all sectors based on common industry classification systems.
    • Botttom-up analysis based on the individual business activities of all companies in the portfolio and subsequent reportable aggregation levels. Breakdown to individual asset level is possible.  
  • The module can be used to analyze the adaptive capacity of companies in the portfolio to climate change along three paths.
  • Holistic modeling: Consistent scenario modeling that goes beyond the CO2 price. For example, energy demand and mix as well as sector-specific technology requirements are also analyzed, taking into account price developments.
  • Outstanding development platform: Climate Excellence runs on the SAP Cloud, which provides a high-performance and secure environment and supports interfaces to SAP's own and other user-specific systems.

Your benefits

Here's how Climate Excellence benefits you as investors

  • Leverage qualitative and quantitative outputs for cross-functional integration of climate risks and opportunities across the enterprise
  • Implementation of climate scenario analyses according to the best practice recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD)
  • Direct use for the annual status report for members of the Principles of Responsible Investment (PRI)

As investors, Climate Excellence provides answers to these questions

  • Climate strategy and business development: how may market demand, technological opportunities and regulations change in the future?
  • Portfolio management and development: how would this impact my business, value chain, portfolio, clients and products? How am I positioned relative to the competition?

Overview: Get an overview of the total climate-related financial impact on the investment portfolio and understand the financial materiality of the scenarios on the portfolio. Comparison with a selected benchmark can illustrate the relative positioning of the portfolio compared to a reference portfolio.

Heatmap: Deepen your understanding of the hotspots in your portfolio. This allows you to quickly prioritize for further, deeper analysis. Hotspots can be displayed by sector, region, and in combination. It is also possible to break down the analysis to individual companies driving the results.

Asset benchmark: Which companies in your overall portfolio participate in transition opportunities across all scenarios and potential pathways of adaptive capacity? Which are more exposed to transition risks? With Climate Excellence, you can see this at a glance. At the sector level, they can see how much individual company performance may deviate from the possible sector average.

Individual asset view: Which technologies, subsectors and regions are the most significant drivers of an individual company's climate-related financial performance? This can be broken down to activity driver level in Climate Excellence. Use these insights to target climate-specific issues into your engagement.

The next expansion stage links this quantification with a qualitative scenario narrative. This gives you all the information you need at a glance.

Climate Excellence – Location-specific physical risk analysis

With this extension, you can assess how much your assets are affected by potential physical climate risks on the basis of geo-coordinates. Taking into account different climate scenarios, you will receive a risk assessment for seven significant climate-related hazards enabling you to evaluate the current risk but also the potential change in risk over time.

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Gunther Dütsch

Gunther Dütsch

Partner, Sustainability Services & Climate Change, PwC Germany

Tel: +49 160 3739019