Monasterolo, Irene. 2020. Climate change and the financial system. Annual Reviews of Resource Economics. 12 1-22.
BibTeX
Abstract
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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Status of publication | Published |
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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 |