Climate-related risks have been front and center for equity investors for some time—there has been growing pressure to align investments to avoid loss or even optimize opportunities related to the impact of climate change. But now the same spotlight is on physical and transition risks in fixed income portfolios, including sovereign bonds.
Sovereign bonds are a bedrock of asset allocations by pension funds. One of the largest asset classes in the world, it is estimated that the overall sovereign bonds market size totals $87.5 trillion—so, detailed climate risk analysis benefits both risk managers and addresses climate change.
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