According to a new analysis, it is believed that investors fail to consider climate risks in stock valuations. If companies around the world are suddenly hit by a carbon price of US$75 per ton, the global stock market may fall by as much as 20%.

The model looks at the impact of a sharp increase in carbon prices on stock prices, and indicates that if only scope 1 and 2 emissions (including emissions from the company’s own operations) are less than $75 per ton of carbon tax.

But Kempen Capital Management, an asset and trust manager worth 86 billion euros behind this research, warned that if indirect emissions (called scope 3) were included, they would fall by 20%. The analysis also found that if the carbon price reaches US$150 per ton, the global market could fall by as much as 41%.

Nikesh Patel, head of investment strategy at Kempen Capital Management UK, warned that investors and the market have not fully considered the impact of rising carbon prices. “The risks you will face in the next few years are very different from the risks in the past,” he added.

Earlier this month, the staff of the International Monetary Fund Suggest Introduce a global carbon price floor in the next ten years to achieve the goal of the Paris Agreement, that is, countries around the world agree to limit global temperature rise. The staff of the International Monetary Fund believes that such a move can “start emission reductions through substantive policy actions.”

at the moment, 64 According to data from the World Bank, a single carbon pricing initiative covers approximately 21.5% of global emissions.Last month, the EU carbon price hit For the first time, 50 euros per ton has pushed the EU’s pollution costs to more than double the pre-pandemic level.

“All these systems are very complex and do not cover all emissions,” said Jaime Ramos, manager of Aviva Investors’ Global Equity Climate Transformation Fund. “If we are in a scenario where China, the European Union and the United States adopt appropriate carbon pricing, this will be a very strong signal to the world and the market.”

Kempen’s research assumes that tax costs will affect the balance sheet rather than being passed on to consumers, and found that the US stock market may fall by nearly 27% with the support of a carbon price of $75, but this year’s decline is only 15.4%. % in Europe.

Kempen’s model focuses on the market’s worst-case scenario for the sudden introduction of global carbon prices, and many believe that a gradual introduction is more likely to have a more modest impact on stock valuations.

Nick Stansbury, head of climate solutions at Legal and General Investment Management, the UK’s largest asset management company, said that a huge challenge in trying to calculate the impact of carbon prices on stock valuations is how much the cost will be passed on to consumers and to the company. How big is the impact of profits.

He said that in many cases, customers may have to bear a large portion of the cost.

LGIM’s own calculations estimate that if a global carbon price is imposed, by 2050, the global stock market may be 16% weaker than otherwise. This is based on the assumption of an “orderly transition” and the assumption that carbon prices will gradually rise to US$383 per ton by 2050.

According to LGIM’s analysis, the energy sector will be hit hardest. Due to carbon risks, more than 60% of the value of the sector is at risk during this period, and utilities and basic materials may also be affected.

“This is an absolutely important investor factor in carbon prices,” Stansbury said.