Avoiding long-term transition risk can most likely be achieved by divesting highly carbon-intensive investments in the energy sector. Here's why:
* Long-term Transition Risk:
* Transition risk refers to the financial risks associated with the transition to a low-carbon economy.
Carbon-intensive investments are particularly vulnerable as regulations and market preferences shift towards cleaner energy.
* Divesting from these investments reduces exposure to potential losses from stranded assets and regulatory penalties.
* This strategy aligns with the need to mitigate long-term transition risks, ensuring portfolio resilience as the global economy transitions to sustainable energy sources.
CFA ESG Investing References:
* The CFA ESG Investing curriculum discusses strategies for managing transition risks, highlighting divestment from carbon-intensive sectors as an effective approach to mitigate long-term risks and align with sustainable investment practices.