`Open Source` scientists carry out largest ever future modelling of portfolios for climate risk and reward,

`Open Source` scientists carry out largest ever future modelling of portfolios for climate risk and reward, provide intelligence for investors: Forestry will be key
The London Accord is a unique collaboration between investment banks, research houses, academics and NGOs. The London Accord has produced the first ‘open source’ research resource for investors in climate change solutions.

The papers in the London Accord show that attractive and sensible investment opportunities exist. Modest technology improvements and policy changes will create more opportunities. The portfolio analysis shows there are good reasons to believe attractive returns are available for portfolios near the ‘efficient frontier’. Infrastructure changes can happen quickly and have repercussion throughout the economy. Savvy investors may want to act now. The London Accord report provides a starting point for the construction of investment portfolios by investors who believe that demographics, climate science and other factors are leading to significant prices of greenhouse gas emissions.

In every large-scale infrastructure change there are winners and losers. Early entrants with a portfolio of investment in the infrastructure change achieve high returns. The London Accord provides a combined appraisal of who these winners and losers might be.

How to create a portfolio: The London Accord papers provide the necessary ingredients for investors. Analysis of the individual solutions, their sustainability implications and the regulatory environment are presented, as well as papers showing the political backdrop for the policy debates. We also present a view of the methodology for constructing and analysing portfolios in D5: A Portfolio Approach to Climate Change Investment and Policy, from which the following conclusions are taken.

* The underlying data is based on relatively low energy prices (~30 $ oil). Under higher fossil fuel prices, renewables and efficiency look much better while carbon capture and sequestration (CCS), and forestry looks worse. The following are highlights from the analysis:
* The efficient frontier implies an abatement cost of about 15 $/tonne. This suggests either normal estimates of marginal abatement costs are on the high side, or, more likely, there is a lot of money to be made if an efficient portfolio is selected.
* The range of average abatement costs in portfolios is 15 - 75 $/tonne, i.e. it is possible to construct very bad portfolios. For investors this implies rewards for careful portfolio construction. For policy makers it implies that trying to pick winners, rather than markets driving efficient investment, could result in unnecessarily high costs and risk erosion of public support and lower economic growth.
* Forestry is by far the biggest contributor to the portfolios on the efficient frontier, as it has the largest abatement potential. There seems to be an unusually large spread for estimates of forestry's potential...