Background
Climate risks have taken centre-stage in numerous fora and discussions. The changes in the climate in the past years have caused adverse effects on communities, wreaking havoc on infrastructure and food supply chains, causing serious threat to human health and people’s livelihoods, and disrupting the financial system. The risks emanating from climate change include impairment of financial assets (with write-downs in the market value of financial investments) and reduction of income streams of borrowers, which could result in unexpected credit losses for sovereign asset managers. Sovereign portfolios are not immune to climate and sustainability risks.

A significant portion of many central bank reserves portfolios consists of sovereign bonds or quasi-sovereign debt securities, such as supranational and agency bonds. Central banks can therefore find ways to combine the primary reserves management objectives with climate-related objectives. However, incorporating relevant climate metrics into investment decisions and implementing climate-related considerations for sovereign asset portfolio remains complex and challenging. The Network for Greening of Financial System (NGFS) in collaboration with climate scientists and economists created hypothetical scenarios resulting in a standardized reference for assessing climate risks from both physical climate impact and transition trends in policy and technology. MEFMI will conduct a virtual workshop to enlighten sovereign asset managers about sustainable investing and the impact of climate risks on sovereign asset portfolios.

Objectives

• To discuss balancing between primary investment and potential climate-related objectives.

• To discuss climate risks and its impact on sovereign asset portfolios.

• To enhance participants understanding on the relevant climate risk metrics.

• To enlighten participants on sustainable investing; and

• To discuss challenges and constraints.

Course Content
The course will cover the following:

• Climate risks and it impact on sovereign asset portfolios;

• Climate risk metrics;

• Sustainable Investing; and

• Challenges in adopting and implementing a climate risk framework.

Target Group
The target group includes junior, mid-level portfolio managers, risk and performance analysts, analysts who oversee the strategic asset allocation from the front and middle offices, and internal auditors from Central Banks, Deposit Insurance Funds, Public Pension Funds and Sovereign Wealth Funds.