Financial services company Merrill Lynch International has developed a new socially responsible investment (SRI) tool that matches geographic risk with company exposure.
It screens for long-term risks, including carbon emissions, political stability and food scarcity.
The global tool, which is called Who Does What Where?, was launched in March.
"It is a tool that helps investors understand the level of risk in their portfolio," Merrill Lynch International SRI and sustainability director Sarbjit Nahal said.
"It helps ESG (environmental, social and governance) investors, but also mainstream investors."
Nahal, who joined the London-based analyst team in December last year from Societe Generale, was one of three equity strategists to develop the new tool.
He said it was designed to give investors a better understanding of the risks their investments faced, and should be seen as complementary to existing risk tools in the market.
"It is a global tool that includes 2700 companies covered by Merrill Lynch and you can go up to 4000 companies if non-Merrill-Lynch-covered companies are included," he said.
"It helps with the initial risk assessment. I would not recommend it as a stand-alone tool to make investment decisions on."
Although the product takes into account emission, it does not yet allow for risks associated with carbon taxation.
"This stands apart from the whole emission trading scheme for carbon; it is a country risk model. It will be looking at things like the absolute levels of emissions per country, emissions per capita," Nahal said.
"But we are also doing some work on developing a separate tool that looks at company-related CO2 (carbon dioxide) emissions, where obviously you could plug in things like short-term/long-term carbon price.
"As we see more and more companies being covered by the emissions trading scheme, as we have seen in Europe and I'm sure in Australia down the track as well, companies will look more upstream and downstream what the emissions cost is and who will bear the burden of that additional cost. That's why we think investors should have a better understanding of that risk."
