A great success for the webinar ‘Climate Risks: Are the Markets Asleep at the Wheel?’
Written on 30 Nov 2023.
A great success for the webinar ‘Climate Risks: Are the Markets Asleep at the Wheel?’ held on November 28, with over 600 professionals registered from 60 countries, to gain insight from EDHEC-Risk Climate Impact Institute Scientific Director Riccardo Rebonato.
A large number of studies has failed to date to identify a robust and economically significant climate risk premium or climate beta, either at the aggregate or at the sectoral level.
Could it be that the markets have already impounded all the relevant information?; that markets expect limited damages?; or that damages are so far in the future to be irrelevant on a discounted basis? What if markets were not informationally efficient and were underestimating the potential impacts from climate change? The latter mispricing hypothesis leaves open the possibility of repricing, either in a gradual or in an abrupt way. We argue this is a novel source of risk, which should be on the radar screen of long-term investors.
During the webinar, organised by EDHEC-Risk Climate Impact Institute and the EDHEC Alumni Finance and Risk & Insurance Clubs, the latest recipient of the PMR Quant Researcher of the Year award reviewed the merits of various market efficiency explanations for the elusive sensitivity of asset prices to climate risk and explored why current market prices may be underestimating the effects of climate risk on government revenues and the cashflows of companies.
Topics covered included:
- Do prices respond to climate shocks?
- Are climate outcomes relevant to asset pricing?
- How plausible is a climate soft landing?
- Could it be that damages are too far in the future to matter in present value?
- Should we be concerned about mispricing and repricing?
Moderator: Fanny Spinetta, Head of Reinsurance at AXA Partners, and Ambassador, EDHEC Alumni Risk and Insurance Club.
To watch the replay of the webinar, follow this link or see the video below:
Contact us at [email protected] to access the slides of the presentation.
For practioners you wish to gain more insight into the research led by Professor Rebonato, we invite you to read some of his recent contributions:
• a position paper titled "Portfolio Losses from Climate Damages: A Guide for Long Term Investors", which discusses the (de)merits of the avice adresses to pension trustees and engages with critics who assert that pensions are being put at risk by the flawed research and groupthink of climate economists.
• a working paper titled "Value versus Values: What Is the Sign of the Climate Risk Premium?", which delves into the intricate dynamics of the climate risk premium, providing theoretical estimations that unveils complexities related to tipping points, abatement policies, and uncertain critical temperature thresholds, offering insights into conflicting empirical findings.
• an article on "Why We Need New Climate Scenarios", exploring the pressing challenges posed by climate change and the crucial need fo new finance tools to address these unprecedented issues.
About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 15 business schools. Fully international and directly connected to the business world, EDHEC commands a strong reputation for research excellence and the ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching is inspired by its research work and a focus on “learning by doing”, all with the aim of equipping people with the skills to succeed in business.
