Quotation Monasterolo, Irene. 2020. Climate change and the financial system. Annual Reviews of Resource Economics. 12 1-22.




The financial system could help achieve the global climate targets by aligning investments to sustainability. However, investors are largely exposed to carbon-intensive assets that could become stranded, thus delaying the low-carbon transition and bringing new sources of risk for financial stability, i.e., climate-related financial risks. Here, we discuss climate-related financial risks, the challenges they pose to traditional economic and financial risk assessment, and the implications for the implementation and feasibility of climate policies. We then present science-based approaches that introduce forward-looking climate risks and their deep uncertainty in financial risk management (e.g., via the climate value at risk, climate spread, climate stress-test). Finally, we present results of applications aimed at pricing climate risks in investors’ portfolios and calculating the largest losses that could lead to systemic risk, in collaboration with leading financial institutions.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Annual Reviews of Resource Economics
Citation Index SCI
WU-Journal-Rating new VW-C
Language English
Title Climate change and the financial system
Volume 12
Year 2020
Page from 1
Page to 22
Reviewed? Y
URL https://www.annualreviews.org/doi/10.1146/annurev-resource-110119-031134
DOI https://doi.org/10.1146/annurev-resource-110119-031134
Open Access N


Monasterolo, Irene (Details)
Institute for Ecological Economics IN (Details)
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