18-12-2024 · Research

Climate Beta: A forward-looking lens on transition risk

Robeco’s Climate Beta is a forward-looking measure that captures climate transition risk above and beyond traditional carbon emissions data. Climate Beta is based on the correlation of a stock with the Climate Risk Factor and reflects the anticipated positive or negative reaction of the stock price to climate events. Because Climate Beta is based on publicly available information, it provides a novel, objective perspective on climate transition risk.

    Auteurs

  • Dries Laurs - Researcher

    Dries Laurs

    Researcher

  • Joop Huij - PhD, Head of Sustainable Index Solutions

    Joop Huij

    PhD, Head of Sustainable Index Solutions

  • Jean-Paul van Brakel - Researcher

    Jean-Paul van Brakel

    Researcher

Climate Beta is based on the concept that the market is relatively efficient in pricing transition risk in the near- and medium-term. It relies on the Climate Risk Factor, which measures the return differential between stocks with high climate risk exposure and those with low climate risk exposure. By incorporating current events and market expectations, Climate Beta is a more timely and forward-looking measure compared to, for example, emissions data. Additionally, the methodology is applicable to a wide range of securities, as market data is available for virtually all listed companies. Such data is highly transparent, because it is not dependent on voluntary disclosures.

Most importantly, Climate Beta is able to identify companies vulnerable to the low-carbon transition (climate laggards) and those expected to benefit from it (climate leaders). This is crucial information that generic emissions data does not provide.

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