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Climate-aware investing

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  • Anandakumar Jegarasasingam

Abstract

Since the signing of the 2015 Paris Agreement, investment strategies focused on managing climate risks and pursuing climate impact have garnered considerable interest. Financial institutions, including some central banks, have started to decarbonise and align their investment portfolios with net zero emissions targets, and many have started to lower the greenhouse gas (GHG) emissions generated from their investments. This paper explores the key concepts, norms and strategies behind such an investment approach, which for easy reference is referred to as climate-aware investing. It also introduces some of the most common investment strategies, such as exclusionary screening and thematic investments, as well as portfolio management techniques such as temperature alignment. The paper also addresses the unique challenges faced by central bank investors in pursuing climate-aware investments. By examining the opportunities and limitations, this study contributes to the broader understanding of climate-aware investing from the perspective of central bank investors.

Suggested Citation

  • Anandakumar Jegarasasingam, 2025. "Climate-aware investing," BIS Papers, Bank for International Settlements, number 155.
    • Handle: RePEc:bis:bisbps:155
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    References listed on IDEAS

    as
    1. Torsten Ehlers & Benoit Mojon & Frank Packer, 2020. "Green bonds and carbon emissions: exploring the case for a rating system at the firm level," BIS Quarterly Review, Bank for International Settlements, September.
    2. Daniel O. Beltran & Pinar Uysal, 2023. "What are Large Global Banks Doing About Climate Change?," International Finance Discussion Papers 1368, Board of Governors of the Federal Reserve System (U.S.).
    3. Dikau, Simon & Volz, Ulrich, 2021. "Central bank mandates, sustainability objectives and the promotion of green finance," Ecological Economics, Elsevier, vol. 184(C).
    4. Patrick Bolton & Marcin Kacperczyk & Frédéric Samama, 2022. "Net-Zero Carbon Portfolio Alignment," Financial Analysts Journal, Taylor & Francis Journals, vol. 78(2), pages 19-33, April.
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