No. 840 - Portfolio decarbonisation strategies: questions and suggestions

In their efforts to manage climate-related risks in their portfolios and support the transition towards a low-carbon economy, many financial intermediaries have pledged to achieve net zero financed emissions by 2050, possibly adding intermediate quantitative targets. Divesting from carbon-intensive firms and investing in low-carbon ones should reduce transition risks and push high emitters to curtail investment in polluting technologies.

This paper argues that a strategy purely based on divesting from carbon-intensive firms and investing in low-carbon ones, seemingly simple and sensible, hides numerous complexities whose implications have not yet been fully fleshed out, and that some of its consequences might be undesired. In a nutshell, despite substantial progress in recent years, more research is necessary to shed light on how the financial sector can effectively pursue the above-mentioned objectives.

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