Global equity markets could fall by as much as 20 per cent if companies around the world were suddenly hit by a $75 a tonne carbon price, according to new analysis that argues investors are failing to account for climate risks in equity valuations.
The modelling, which looked at how hard a shock increase in the carbon price could hit share prices, said global markets would fall by about 4 per cent if just scope 1 and 2 emissions — which cover emissions from a company’s own operations — fell under a $75 per tonne carbon tax.
But Kempen Capital Management, the €86bn asset and fiduciary manager behind the research, warned of a 20 per cent drop if indirect emissions, known as scope 3, were included. The analysis also found that if the carbon price were to hit $150 a tonne, global markets could fall by as much as 41 per cent.