Climate-Resilient Smart Beta Indexes

Abstract

An increasing number of extreme weather events have hit the United States in recent years as a result of rising temperatures linked to climate change. But, so far, asset owners and asset managers have mostly ignored the impact that extreme climate hazards have on their investments. Risk models used in portfolio management and construction have not yet incorporated factors capturing the increased likelihood of climate hazards such as hurricanes, floods, droughts, and wildfires and the impact they will have on investments.