Climate scenarios, investors’ expectations and financial risk: lessons from climate stress
Irene Monasterolo has been invited by Deutsche Bundesbank to conduct an internal seminar for Bundesbank researchers. The Research Centre organises a range of events for Bundesbank researchers. There is usually one research seminar held each week.
In a recent article in Science, Prof. Monasterolo and her coauthors develop and apply a methodological framework to connect climate mitigation scenarios and financial risk assessment in a circular way, capturing the interdependence among investors’ perception of future climate risk, the credibility of climate policies, and the allocation of investments across low and high carbon assets.
The framework and results have implications for
(i) the use of scenarios in climate stress-test exercises,
(ii) the criteria used by central banks to identify eligible assets in their collateral frameworks and purchasing programs, and
(iii) the design of an optimal carbon tax.
She will present her paper: "Accounting for Finance is Key for Climate Mitigation Pathways" co-authored with:
- Stefano Battiston, Department of Banking and Finance, University of Zurich, Zurich.
- Keywan Riahi, Research Group Leader, Sustainable Service Systems, International Institute for Applied Systems Analysis (IIASA)
- Bas J. van Ruijven, International Institute for Applied Systems Analysis (IIASA)
Irene Monasterolo is Professor of Climate Finance at EDHEC Business School and EDHEC-Risk Institute in Nice, France. She is also a senior research fellow at the Vienna University of Economics and Business and Boston University, as well as a visiting scholar at the International Institute for Applied Systems Analysis. Her recent publications also include Battiston, S., Dafermos, Y., Monasterolo, I., 2021, “Climate risks and financial stability”, Journal of Financial Stability, Vol 54, 10.1016/j.jfs.2021.100867.
Further information on the conference can be found on the Deutsche Bundesbank website.
