Economy & Research
The Growing Relevance of Climate in Valuation
Climate change poses significant risks and opportunities for businesses. Transition risks, such as regulatory changes, market preferences, and technological advancements, can reshape industries and affect firm valuations. Conversely, climate-focused companies that offer solutions to mitigate or adapt to climate change are often positioned to benefit from increasing demand and favorable policies.
Research highlights that firms with a high exposure to climate solutions often exhibit higher valuation multiples, reflecting market optimism about their future profitability. However, these firms may also demonstrate lower expected returns due to their role as hedges against climate transition risks.
