Putting economics to good use
rigorous analysis | practical solutions | positive change
Vivid Economics is a strategic economics consultancy spanning public policy and support for commercial decision making with a broad, international focus
The Inevitable Policy Response (IPR) is a landmark project to prepare financial markets for a wave of policy action as governments worldwide are forced to address climate change. Government action to tackle climate change has yet to achieve a fundamental economic shift, but as the realities of climate impacts become increasingly visible, governments will be forced to act more decisively. Yet, financial markets are not adequately pricing in climate-related policy risk.
In December we launched new analysis that shows in detail how the inevitable policy response to climate change will cause re-pricing of many the world’s most valuable companies by 2025. This forecast is based on company level impacts and shows major winners and losers emerging between and within key sectors including energy, automobiles, utilities, minerals, and agriculture.
Our aim is to deliver a reality-check to investors who assume governments will take limited action on climate change, while also providing them with a tool to navigate the complex and evolving policy landscape. We hope this will encourage investors to engage in forward looking risk management – shifting from brown to green asset allocations while advocating and engaging for earlier and more ambitious climate action.
This forecast tool responds to fresh concerns that financial markets are overly reliant on business-as-usual outlooks – such as the International Energy Agency’s Stated Policy Scenario (STEPS) – that assume a limited policy response to climate change. Up to now, a major problem for investors has been a lack of a credible forward-looking alternative for business planning. We hope to fill that gap.
- Find more details of the results and the full report: Forecast Policy Scenario: Equity Markets Impacts
In early 2020 we will release analysis on how the inevitable policy response to climate change will impact other asset-classes.
The sessions will cover the Inevitable Policy Response initiative and the UN Net Zero Asset Owner Alliance. We’ll also discuss TCFD, against which the PRI is moving towards mandatory reporting for signatories, and an area in which the Bank of England has also signalled action.
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