MSCI urges Korea to brace for climate risks

MSCI head of climate policy and strategy David Lunsford, left, and MSCI head of Korea client coverage Kim Tae-hee / Courtesy of MSCI

By Park Jae-hyuk

MSCI has advised market participants here to be better aware of the importance of climate risk management, saying it is crucial to align investment strategies and seize new opportunities.

David Lunsford, executive director and head of climate policy and strategy at MSCI ESG research, told Korean reporters in an online media briefing Wednesday that climate change is reshaping the global economy, and highlighted that climate risks are changing the risk-return profiles of organizations.

“There is a continuing need to integrate climate issues into the investment process,” he said. “Institutional investors are urged to identify climate vulnerability and measure the financial impact that specific scenarios would have on each portfolio.”

During the briefing, Lunsford introduced the Task Force on Climate-related Financial Disclosures (TCFD), established in June 2017 by the Financial Stability Board, an international body that monitors and makes recommendations about the global financial system.

This has made investors regard climate change as a major systematic risk and created a reporting framework which allows institutions to prepare themselves for upcoming regulation.

The TCFD's recommendations have support from various institutions and businesses in Korea, such as Samsung Electronics, SK hynix, POSCO, KB Financial Group, Shinhan BNP Paribas Asset Management and the Korea Exchange.

MSCI head of Korea client coverage Kim Tae-hee pointed out the country is still in the early stages of addressing climate change risk, although she acknowledged the government and businesses for beginning to tackle climate change and deploy climate strategies aligned to meet a greater demand for business sustainability.

“We are committed to working closely with investors in Korea to empower them to better manage portfolio exposures and develop climate-aware investment strategies,” she said.

“In February this year, we launched the MSCI Climate Value-At-Risk, a new solution to help investors assess their exposure to climate-related risks and opportunities. The MSCI Climate Value-At-Risk provides forward-looking and return-based valuation assessments to measure the potential impact of climate change on company valuations.”

The world's leading provider of critical decision support tools and services for the global investment community also announced last month it launched the MSCI Climate Paris Aligned Index Suite to help investors seeking to align with the Paris Climate Accords.