IDEAS home Printed from https://ideas.repec.org/a/anr/reseco/v12y2020p299-320.html
   My bibliography  Save this article

Climate Change and the Financial System

Author

Listed:
  • Irene Monasterolo

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.

Suggested Citation

  • Irene Monasterolo, 2020. "Climate Change and the Financial System," Annual Review of Resource Economics, Annual Reviews, vol. 12(1), pages 299-320, October.
    • Handle: RePEc:anr:reseco:v:12:y:2020:p:299-320
    DOI: 10.1146/annurev-resource-110119-031134
    as

    Download full text from publisher

    File URL: https://doi.org/10.1146/annurev-resource-110119-031134
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.
    File URL: https://libkey.io/10.1146/annurev-resource-110119-031134?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anr:reseco:v:12:y:2020:p:299-320. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: http://www.annualreviews.org (email available below). General contact details of provider: http://www.annualreviews.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.