Analyzing Environmental Factors for Corporate Bonds


With less than 100 days until the Paris climate summit dubbed 21st United Nations Conference of the Parties (COP21), institutional investors are taking a gander of potential policy changes that could impact their portfolio and holdings. Corporate fixed income is a staple for a clear majority of public institutional investors. The incorporation of environmental factors when analyzing bonds is a bit different compared to listed equities. Traditional corporate risk factors are divided into business risk and financial risk. For environmental analysis, risks can be broken down into operational risk and climate risk.

When analyzing environmental factors, from a fixed income perspective, climate risk can be broken down into two big buckets, mitigation risk and adaptation risk.

Operational Risk

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