By Pooja Khosla, CEO, Entelligent
With a strong Republican party showing in the U.S. election, it’s likely there will be meaningful shifts in the country’s climate change policy and participation. But regardless of what comes next, the energy transition will remain a potent influence on investment and portfolio performance.
That’s because transition risk isn’t just about policy or politics: It’s about understanding which companies will struggle as the energy and climate-change landscape shifts, and which will thrive.
Since 2019, Entelligent has argued for a new way to think about climate risk—through the lens of energy. Our fully empirical analytic model captures and measures the collective impact on assets and investments of government and regulatory activities (e.g., the future carbon penalties many investors worry about) as well as of technology innovation, shifting market demand, and many other risk drivers. The latter include powerful influences on performance that far fewer investors measure, such as a sharp drop in the price of renewables. Our model is agnostic: It measures the impact of both pro- and counter-transition actions and events.
Entelligent’s data is very effective in forecasting performance in an environment—like the current one—in which climate and energy policy change is happening. Should the incoming administration retreat from the prior administration’s more activist stances, that will lead to material changes across all categories of transition risk and their related opportunities. But those transition risks and opportunities will not disappear.
Entelligent’s critical advantage is that we drive performance and meet the needs of investors —regardless of their politics:
– For climate change skeptics, we dispassionately measure the impact of energy pricing and demand changes on future investment performance.
– For climate change activists, we drive performance and carbon reduction by enabling more accurate discernment among energy transition leaders and laggards—regardless of industry sector.
When smart investors declare that “ESG is broken”—as some have in the recent past—we see that as exactly the problem Entelligent solves.
