Episode Transcript
Paul: In this final episode of season two of FTSE Russell Index Ideas, we turn our attention to climate change and the energy transition, where global policy is increasingly uneven and volatile. I'm joined by two guests. Stephanie Maier, head of sustainable at FTSE Russell and Thomas Bremner Bligaard is managing director and co-founder of Planetrics. In May 2026 FTSE Russell and Planetrics announced they had signed a memorandum of understanding focused on the joint development of climate scenario-based indices and analytics. Stephanie and Thomas, welcome to Index Ideas.
Thomas Bremner Bligaard: Thank you.
Stephanie: Thank you
Paul: Let me start with you, Thomas. Who are Planetrics?
Thomas Bremner Bligaard: Yeah, so that's a great question, Paul. So Planetrics, we are a sustainability analytics firm that specialises in helping financial institutions understand the impact of climate on their investments and on themselves. And why do we do that? We try to do it so they can limit risks, which we'll talk a little bit about later today, I'm sure, from other policy of physical risk, but also find opportunities from the low carbon transition.
And we're a bit of a mix of people from different backgrounds: climate scientists, economists, and engineers.
Paul: Thank you, Thomas. Stephanie, how is FTSE Russell working with Planetrics?
Stephanie: FTSE Russell is working with Planetrics to help bring climate scenario analysis more directly into the index design. So as you've heard from Thomas, Planetrics brings deep modelling of both transition and physical climate risks. And at FTSE Russell we bring benchmark construction, governance, distribution. And the goal is really to develop indices, transparent indices and analytics that help investors understand how these different climate pathways and scenarios can affect portfolios across asset classes.
Paul: Thank you. Thomas, why has the global consensus on climate fractured in the last couple of years and what happens next?
Thomas Bremner Bligaard: Paul, I think a lot of other things have happened in the world around climate that has changed our perspective since we were standing back in the heydays of Paris, where the Paris Agreement was, we committed to below one and a half degrees and there was sort of policy consensus that we were moving in one direction. One thing is geopolitical change.
To get into diesel, that means that different regions are moving at different paces on how much policy action they're doing on climate. The other thing I think we have learned, which is just as important and sometimes on I think underappreciated, is that technology has moved very rapidly, but in certain domains. So we see very rapid technology evolution and things like batteries and solar PVs that are bringing down costs. So in those markets we see faster action than we maybe thought when we were back in Paris.
Whereas in other markets, hard-to-abate sectors and areas where we're very dependent on policy, like carbon pricing, that has not come in to the same degree. And that means that we are in a much more fractured world today than we thought we would maybe be in when we stood back in Paris.
Paul: Thank you, Thomas. Stephanie, where are we lagging as a world and where are we ahead in our progress towards the 2050 net zero carbon emissions targets?
Stephanie: I think we're setting ahead in areas where we see the economics and the policy reinforcing each other. So areas like renewables, electric vehicles, batteries, parts of that clean technology investment, those opportunities linked to the low carbon transition. I think we're lagging where it's harder, system change, decarbonising heavy industry, where you need a lot more of that policy alignment and financing, you know, all coming together.
So I guess I describe the transition as real but uneven, echoing that point that in different markets it's taking different pathways. So I think the challenge and the perspective for investors is really, where exactly is the transition happening, how fast and what are the consequences for portfolios.
Paul: Thank you. Thomas, could you elaborate a bit more on how existing climate scenarios hold up against the messier transition that we're all now facing?
Thomas Bremner Bligaard: Yeah. So I think maybe before I get into that, Paul, I think the starting point is to say that there's a lot of good work that has been done on climate scenario analysis by all sorts of different research groups, NGFS is one of them. And they are doing a very good job in trying to predict the future. But the future has just turned out to be more messy than the stylised worlds that they were describing. And some of those models were also designed to answer a slightly different question, which is what policies should we have to meet certain targets? And that means that if financial institutions consume those scenarios just
Naively, they get disappointed because we don't see gradual uptake of renewable technologies. We see it more happening in waves. We don't see carbon policy being rolled out gradually and in a consistent framework across different domains and we see some regions moving really fast. Like we know that there's a lot of decarbonisation happening in China, happening at a probably even more rapid pace than some of those scenarios we're capturing. So it's really linked to Stephanie's point around that we see some technologies accelerating transitions and some policy policies in certain regions accelerating transition. And that's what we're really hoping with this partnership with FTSE that we can that we can give investors access to some of those insights that we see in the real world.
Paul: Thank you, Thomas. Stephanie, FTSE Russell obviously talks a lot to asset owners, interrogates them via surveys and publishes the results. How are those asset owners currently integrating climate risks and the associated opportunities into their long-term asset allocation decisions and what key challenges do you think they face?
Stephanie: We're seeing asset owners increasingly, and I think with greater conviction, treating climate as an investment risk and return issue. So we see the implementation through broader ESG integration and more specifically on climate, using scenario analysis as a forward looking way of understanding that risk and opportunities within the portfolio.
We're also seeing that from more thematic allocations to climate transition benchmarks, but also in things like stewardship as well. The challenge is partly as Thomas referred to, the state of the markets that we have at the moment. We have differing regulation, different pace of change and transition in in different markets. And importantly, how do you translate those signals, so the you know the policy technology, what's happening into the investment implications, the impact today, but also over the longer term. And you know that that challenge is something that you know continues to be something that that we work with our clients on and also where we think you know transparent indices and analytics, you know, building in this additional lens, scenario risk lens
Paul: Thank you. Thomas, how do we get to pricing climate risk in dollars instead of scores within a model?
Thomas Bremner Bligaard: Really good question, Paul. So we take a four-step approach. So first of all, you need to know what is changing in the world. Because what we're talking about here from a climate perspective, both policy and technology and the physical environment will change independent from whatever we do. If we apply a lot of policy, temperatures will rise. If we don't allow a lot of policy, temperatures will rise rapidly. If we apply a lot of policies, well then taxation and so on will change. And that means our history is a bad predictor. So first we need to define what is happening in the future. So that's what we call scenario. Then we need to translate that scenario into economic shocks. So what does an increase in temperature mean for things like wildfire damages?
And then we need to understand what those wildfire damages affect, for example, a company's activity. So, how much exposure does a company have in Spain wildfire areas? And once we have those three, we can get the first idea about like how might wildfire risk drive cost increases on the company side over time. And then we feed that into a financial model. And that financial framework is the same as we would as a normal investor. But it all starts from the recognition that the future will be different from the past. Future is exactly like the past, then a lot of our existing tools could work. The problem is that the future is very different from the past.
Paul: And how can we integrate transition and physical risk into a combined view? Stephanie, let me start with you.
Stephanie: So I mean exactly Thomas has this outline, you need to understand that transition risks, policy, technology, market shifts and how they affect companies, but also the physical risks have things like the heat, extreme heat, flooding, storms, you know, water stress, how they affect kind of assets and supply chain. So looking at those together and having a combined view helps investors have that sort of fuller risk-adjusted picture. So not just how well a company is decarbonising or how well they are positioned for that transition, but that interconnectedness with sort of resilience to the changing climate. And that's a dynamic picture, but one that we think with our partnership now have a much better lens to offer our clients, asset owners and asset managers.
Paul: Thanks Stephanie. Tom, any thoughts on how best to arrive at a combined view?
Thomas Bremner Bligaard: I think Stephanie hit it on the head there. What I would say is there is no way around a combined view because these risks are not additive. So let me give you a very concrete example of that. If you're a real estate investor and you're looking at a real estate portfolio that is exposed to physical risk but also has a new refurbishment need because they need to make certain energy efficiency standards. Well, that can tibble the entire business case. If you looked at them in isolation, you only thought about increased insurance cost, or you only thought about I need to get in a new heating source, you might have underestimated those risks. So there is this way of thinking about this as a one-sided risk is a danger to the financial industry. That's what we're actually trying to help out the from electric to our clients, but also for the FTSE partnership with making investable products that are that make that easier.
Paul: Thanks, Thomas. Stephanie, so why is it challenging for a benchmark to reflect how the climate transition is actually happening?
Stephanie: Well, I think what we've been talking about is how the transition is hard to predict itself. It's messy, it's non-linear. The beauty about benchmarks is that they're very sort of clear, rules-based, repeatable methodologies, bringing together something that helps investors understand what those pathways look like and therefore how various strategies perform against them.
As well as thinking about, okay, what does all of that climate insight around the transition physical risks tell us about what would make a good investable index, also incorporating things, diversification, turnover, tracking error considerations, all of those things, means that actually, there's a huge amount that's possible with that construct and that design. And that's what we're sort of looking forward to developing.
Paul: Thanks Stephanie. So what can you both tell me and listeners on the indices and analytical tools, FTSE Russell and Planetrics are working on and when can we expect to hear more? Let me start with you, Stephanie.
Stephanie: I think as we've outlined, we're working really closely on a range of climate scenario-based indices and analytics, so drawing on that transition and climate physical risk insight and our index design frameworks. The focus is really on sort of decision-useful climate benchmarks that help investors position for this range of plausible climate pathways.
So we expect to be sharing more later this year, so watch this space.
Paul: Thank you. And any other concluding thoughts, Thomas?
Thomas Bremner Bligaard: I'd say often when we talk about climate we think about this as something very far in the future. I think current climatic events happening in Northern Europe, Western Europe at the moment, very high temperature shows that it's not a long-term only risk, it's also a long term risk, but it's also a short term risk.
I think you can actually see similar patterns around some of the fuel disruptions we have seen from the Middle East, which can be thought of almost as a transition shock with rising energy prices. What does that mean for the real economy? I'm super excited to work with FTSE on how do we integrate this, what I believe is leading climate analytics into driving real decision-making and making it easier and consumable for investors, which I think is the real barrier when you're looking at something that is a future shock that has not happened yet. So that's what really excites me about this partnership.
Paul: Thank you very much Thomas. Stephanie, any concluding thoughts from you?
Stephanie: So I think echoing the point that, climate needs to be taken into account investing those impacts, the shorter term, longer term impacts, how they differ across different regions, asset classes, all of those things need to be better understood. So investors need those tools, transparent, investment relevant, and robust in the face of what we know will be is already a sort of uneven transition. So I think looking forward to helping to bring that better data, better scenarios, better benchmarks to help investors do that.
Paul: Stephanie and Thomas, thank you very much for joining FTSE Russell Index Ideas.
Stephanie: Thank you.
Thomas Bremner Bligaard: Thank you.
