Impact of physical climate risks on security selection still in infancy

Earlier this year, Germany's DWS began to incorporate physical climate risk into its portfolio construction -- but has the practice sparked any changes? AMWatch turned to one of the EUR 700 billion money manager's head researchers in search of an answer.

"The costs of physical climate damage amounted to around USD 600 billion (EUR 520 billion) last year, and it should, therefore, already be an important risk factor for investors to consider. We can't predict exactly where the next extreme weather event is going to happen, however, we can build a portfolio that's more resilient to its effects," Michael Lewis said to AMWatch in May 2018. | Photo: PR

Earlier this year, DWS -- the EUR 700 billion asset manager with German roots -- started building physical climate risk into its portfolio construction.

The move came as a result of asset pricing seeming to underestimate these risks, according to research conducted by DWS' head of ESG thematic research, Michael Lewis.

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