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Dynamic modelling of climate-related shocks in the Spanish fund sector

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  • Diana Mykhalyuk

Abstract

The investment fund sector plays a key role in Spain´s financial system and in financing the transition to climate neutrality. This study presents a pleliminary estimate of potential losses in th funds´portfolio under three European Systemic Risk Board (ESRB) climate transition stress scenarios incorporating a dynamic assessment framework to simulate and evaluate both static and dynamic impacts of climate transition risk. The analysis consists of a static shock applied to direct and indirect funds holdings varying by asset type. Dynamic effects, including investor flows and portfolio adjustments, are incorporated to assess behavioural and systemic responses under transition scenarios. The analysis focuses on the division of funds into sustainable and non-sustainable funds, classified according to the emission intensity information. Furthermore, the paper develops a novel methodology for assessing the ESG rating of sovereing debt. The main findings suggest that Spanish mutual funds would record lower losses (8.2%) on average compared to their European peers (15.8%), with non-sustinbale funds exhibiting higher losses than sustainable funds when classified by emission intensity

Suggested Citation

  • Diana Mykhalyuk, 2025. "Dynamic modelling of climate-related shocks in the Spanish fund sector," CNMV Working Papers CNMV Working Papers no. 9, CNMV- Spanish Securities Markets Commission - Research and Statistics Department.
    • Handle: RePEc:cnv:wpaper:dt_91en
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    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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