2021 will be a pivotal year to curb climate change. Although global CO2 emissions dropped 7% in 2020 due to the effects of Covid-19-related lockdowns, stronger action will be needed at the upcoming Conference of the Parties (COP) 26 to keep temperature increases below 2°C and towards 1.5°C.1 Achieving the 1.5°C goal will require net zero global emissions by 2050. Today, the financial sector has new tools to measure the alignment of investment portfolios with the goal of net zero global emissions by 2050. Among these are temperature scores. To compute the temperature of company x, one compares the future emissions trajectory of that company with the corresponding trajectory of its sector, as deemed by the International Energy Agency (IEA) in alignment with a world where the temperature rise is limited to 1.5°C. So far, these scores have been adopted by only a handful of investors. A significant amount of work is still needed for investors to efficiently use such scores in their strategies.

India is the fifth-largest economy in the world, according to the World Bank, in terms of nominal 2019 GDP in dollars, and ranks second by population (1.38bn). Although it is one of the world’s fastest-growing economies, its GDP per capita is more than 29x and 4x lower than the USt or China, respectively (also according to the World Bank, nominal 2019 per-capita GDP in dollars). The potential for a catch-up in income over the next decades looks huge.

Institutional investors have significantly increased their allocation to real and alternative assets, such as private equity, real estate, infrastructure and private debt, over the past decade, with the objective of enhancing the return or the expected yield of their portfolio, as well as improving its diversification. Integrating such assets into these portfolios raises a number of challenges linked to their limited liquidity, their strong specificity and their sensitivity to risks that are not integrated in traditional financial frameworks. As a result, standard portfolio optimisation is ill-adapted to portfolios mixing standard and alternative assets.