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Keeping Score

A guide to assessing portfolio resilience

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By Jeffrey Chee | May 28, 2019

Gain insights into ways to measure and improve portfolio resilience to sustainability-related risks

Is your portfolio resilient to as wide a range of economic environments as possible and how resilient is it? The pace of change in sustainability is accelerating. A starting point is to look at resilience through the lens of potential sustainability scenarios that might occur.

There are two key dimensions to portfolio resilience:

  • Materiality – which sustainability-related risks are likely to be the most impactful?
  • Magnitude – where there are material risks, how large are the exposures to these risks?

Most asset owners rely on asset-level or manager-level practices to manage sustainability risk. We believe that asset owners can take action today to assess portfolio resilience and integrate sustainability-related risks into top-down or total portfolio construction decisions.

In this article, we talk about the concept of portfolio resilience and introduce a practical, implementable framework for assessing portfolio resilience with sample outputs from resilience/sustainability risk exposure analysis.

This article was first published in the April 2019 edition of ASFA’s Superfunds magazine.

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