Prime climate risk ratings | Insight Investment

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Climate change is one of the greatest challenges of our time. Governments and businesses are grappling with the implications, and responsible investors seek to discern how climate change might affect investment risks and opportunities.

The Prime climate risk ratings aim to highlight climate-related risks and opportunities for corporate issuers, and are aligned with the framework developed by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

c.1,700

Number of issuers within the universe

c.200

Data inputs

Key climate-related issues covered

c.50

Material metrics for key issues within the model

All above information is as at 31 March 2023 unless stated otherwise.

Prime climate risk ratings: better reflecting climate issues for investors

Insight is dedicated to precision investing that helps clients achieve their goals, and we believe analysis of climate issues can play a central role.

1

Looking for fixed income portfolios that manage the risks from climate change?

The Prime climate risk ratings are based on multiple data inputs, and aim to reflect both the physical risks of climate change and the risks to corporates from the transition to a low-carbon economy.

2

Seeking investment strategies that reflect your outlook on climate change?

Prime climate risk ratings help to enable the creation of solutions and portfolios with specific climate criteria.

3

Need to report on climate change exposures?

Our ratings are aligned with the TCFD framework, and are intended to support compliance with initiatives and regulations that encourage greater transparency on climate risks.

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Introduction to Prime climate risk ratings

In this video, Carly Thomas, ESG investment specialist, introduces Prime climate risk ratings.

She explains how the ratings, which highlight physical and transition risks related to climate change, aim to help our analysts and portfolio managers in their investment decisions and engagements with corporate issuers.

Prime climate risk ratings FAQ

The Prime climate risk ratings are applied to corporate entities and aim to highlight key climate risks. They are based on extensive raw data, which is applied to generate scores for 15 key issues across a range of themes, which are categorised as either physical or transition risks. The Prime climate risk ratings range from 1 (best possible) to 5 (worst possible).

The Prime climate risk ratings use inputs from multiple data providers, which are curated by Insight’s Responsible Investment Team who adjust them for materiality, quality and relevance for the key climate issue or issues to which they pertain.

These data are then used to generate scores across 15 key climate issues, which are in turn weighted to derive scores across various themes such as governance and regulation.

Based on the theme scores, a company is assigned a physical risk rating and a transition risk rating. The worst of these ratings is the company’s overall climate risk rating.

The ratings are updated quarterly, though some underlying data may be updated less frequently.

Insight's credit analysts and portfolio managers can use the Prime ratings to support their regular research on corporate debt issuers.

Any risks flagged by the system may prompt further investigation or proactive engagement and dialogue with a debt issuer, to investigate issues further, to ensure the highlighted risks are appropriately managed, or to encourage a change in corporate behaviour to mitigate the identified risk. Insight’s Responsible Investment Team also uses the ratings to monitor company performance and set engagement priorities.

For more information on Insight’s programme of engagement with companies, please see our annual stewardship report. In 2022, we conducted over 1,240 engagements with debt issuers, of which the majority included some form of ESG dialogue. These included over 140 engagements focused solely on ESG issues.

Climate change is one of the most significant risks we face, with far-reaching implications across a wide range of industries. We developed our climate risk ratings to help us identify where climate risks matter most.

David McNeil, Head of Responsible Investment Research and Stewardship

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Prime climate risk ratings FAQ

What are the Prime climate risk ratings?

How do the Prime climate risk ratings work?

What does a high or low Prime climate risk rating indicate?

What entities do the Prime climate risk ratings cover?

How do Insight's portfolio managers use the Prime ratings?

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