Climate risk modelling research chair established

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Actuarial Post 06/10/2023

Actuarial Post

"(...) EDHEC-Risk Climate Impact Institute and Scientific Beta are pleased to announce the endowment of a research chair entitled "Upgrading Climate Scenarios for Investment Management". This new long-term research effort is part of the EDHEC-Scientific Beta Advanced Climate Investing Initiative and aims to address the pressing need for fit-for-purpose tools to integrate climate risks into investment management.

 While climate change increasingly becomes a tangible reality, with more frequent and severe extreme weather events, the bulk of damages to nature, people, and economies remains in the future. This makes historical data and traditional statistical estimation methods largely irrelevant to assess and manage climate risks and explains why climate scenario analysis and stress testing have taken central stage in the investor toolbox.

 In their current state however, they are rather crude what-if tools suited to assisting long-term strategic thinking about uncertainty and spotting fragilities to potential shocks. Considerable work is required to extend and repurpose climate scenarios for risk and investment management purposes. The critical challenge is to embed scenario analysis in a coherent probabilistic framework, enabling finance professionals to compute relevant risk and return metrics.

 EDHEC-Risk Climate Impact Institute Scientific Director Professor Riccardo Rebonato will lead the research effort. A nuclear physicist by training, Professor Rebonato has made notable contributions to quantitative portfolio theory and risk modelling and management and has held senior research positions in the financial industry (...)" 

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Climate risk modelling research chair established, 06/10/2023