Optimizing Portfolios across Risk, Return, and Climate

Benoît Mercereau, Lionel Melin

2020 | Practitioner | Climate, Portfolio Construction, Risk & Performance

Equity investors can lower their portfolio’s climate alignment temperature to 2.5°C without hurting risk-adjusted returns. Lowering temperature further is progressively more costly. Asset allocators can lower their portfolio’s temperature at a moderate cost to risk-adjusted returns. Our optimizer allows each investor to find his or her best risk, return, and climate impact trade-off.