  We develop a comprehensive framework to measure the impact of the climate
transition on investment portfolios. Our analysis is enriched by including
geographical, sectoral, company and ISIN-level data to assess transition risk.
We find that investment funds suffer a moderate 5.7% loss upon materialization
of a high transition risk scenario. However, the risk distribution is
significantly left-skewed, with the worst 1% funds experiencing an average loss
of 21.3%. In terms of asset classes, equities are the worst performers
(-12.7%), followed by corporate bonds (-5.6%) and government bonds (-4.8%). We
discriminate among financial instruments by considering the carbon footprint of
specific counterparties and the credit rating, duration, convexity and
volatility of individual exposures. We find that sustainable funds are less
exposed to transition risk and perform better than the overall fund sector in
the low-carbon transition, validating their choice as green investments.
