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Climate regulation and financial risk: The challenge of policy uncertainty

Author

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  • Berg, Tobias
  • Carletti, Elena
  • Claessens, Stijn
  • Krahnen, Jan Pieter
  • Monasterolo, Irene
  • Pagano, Marco

Abstract

Climate risk has become a major concern for financial institutions and financial markets. Yet, climate policy is still in its infancy and contributes to increased uncertainty. For example, the lack of a sufficiently high carbon price and the variety of definitions for green activities lower the value of existing and new capital, and complicate risk management. This column argues that it would be welfare-enhancing if policy changes were to follow a predictable longer-term path. Accordingly, the authors suggest a role for financial regulation in the transition.

Suggested Citation

  • Berg, Tobias & Carletti, Elena & Claessens, Stijn & Krahnen, Jan Pieter & Monasterolo, Irene & Pagano, Marco, 2023. "Climate regulation and financial risk: The challenge of policy uncertainty," SAFE Policy Letters 100, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safepl:100
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    References listed on IDEAS

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    2. Mr. Dimitri G Demekas & Pierpaolo Grippa, 2021. "Financial Regulation, Climate Change, and the Transition to a Low-Carbon Economy: A Survey of the Issues," IMF Working Papers 2021/296, International Monetary Fund.
    3. Stefano Battiston & Antoine Mandel & Irene Monasterolo & Franziska Schütze & Gabriele Visentin, 2017. "A climate stress-test of the financial system," Nature Climate Change, Nature, vol. 7(4), pages 283-288, April.
    4. J.-F. Mercure & H. Pollitt & J. E. Viñuales & N. R. Edwards & P. B. Holden & U. Chewpreecha & P. Salas & I. Sognnaes & A. Lam & F. Knobloch, 2018. "Macroeconomic impact of stranded fossil fuel assets," Nature Climate Change, Nature, vol. 8(7), pages 588-593, July.
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    Cited by:

    1. Anna L. SOBIECH & UCHIDA Hirofumi, 2023. "Characteristics of Green Loan Users and the Green Policy Mix," Discussion papers 23072, Research Institute of Economy, Trade and Industry (RIETI).

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    Keywords

    Climate Change; Financial Regulation and Banking;

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