Spring 2025 EDHEC Climate Institute special issue of IPE's Research Insights Supplement Published
Written on 10 Mar 2025.
Our first Research Insights supplement for Investment & Pensions Europe (IPE) provides science-based answers to pressing investment questions in relation to climate change, physical risk modelling, climate data, and transition technologies:
The EDHEC Climate Institute follows the long-standing research tradition of EDHEC Business School and represents a collective effort to address the pressing challenges of climate change by promoting interdisciplinary research with a more integrated vision, drawing on historical expertise in climate finance while leveraging new complementary fields to produce concrete insights and applications.
On the trail of the EDHEC-Risk Institute and the EDHEC-Risk Climate Impact Institute, the recently formed EDHEC Climate Institute addresses the diversity of climate change-related issues such as evaluating the financial implications of climate change on equity valuation, assigning probabilities to climate scenarios, integrating high-resolution climate data, assessing decarbonisation and resilience technologies, and discussing transition finance, which is a main driver for climate transition.
While climate finance often emphasises transition risk, initial work from Riccardo Rebonato highlights the critical importance of physical climate risk, which may have an even greater impact on financial markets. The research shows how physical damage impacts equity valuations under different policy and climate scenarios, revealing potential market mispricing. It underscores the need to better incorporate physical risks into financial models, as current valuations may miss their true economic effects.
Climate risk assessments often use separate scenarios that focus on extreme transition risk or severe physical risk, neglecting the probabilistic interplay between these outcomes. The study by Riccardo Rebonato proposes methods to attach probabilities of various emission abatement scenarios, integrating technological, fiscal, and policy feasibility into the analysis. This research also highlights a low probability of achieving the Paris Agreement target and the need for a more realistic alignment between economic recommendations and policy action.
Hurricanes devastate coastal cities, droughts cripple agricultural plains and wildfires ravage forests. Climate change impacts are localised, yet global averages fail to reflect these disparities. Climate risk assessments must take advantage of granular spatial data surpassing their complexity and inherent computational challenges. Such data enables precise identification of geo-sectorial vulnerabilities, allowing cities and businesses to allocate resources, develop targeted adaptation strategies and build resilience. This is what Nicolas Schneider explores in his work on how advances in data and modelling are transforming climate risk management, ensuring investors are equipped to account for localised risks and grasp the true economic cost of adaptation.
On the latter, understanding the technologies behind resilience and decarbonisation measures is a game changer. Ambitious goals and net-zero pledges dominate the conversation but remain vague or lack actionable pathways. Focusing on the technological possibilities allows one to move beyond abstract commitments. This is illustrated by the infraTech 2050 initiative, which is a science-driven approach offering systematic evaluation of technologies and strategies for decarbonising and strengthening resilience of 101 infrastructure asset subclasses with granular information. The article by Conor Hubert, Rob Arnold and Nishtha Manocha illustrates this with a concrete example on data infrastructure, a critical backbone for modern economies. The successful adoption of resilience and decarbonisation technologies depends on effective regulatory mechanisms.
Therefore, transition finance is critical to decarbonisation. In this issue, Frédéric Ducoulombier assesses the role given to transition finance in the EU Sustainable Finance Framework and highlights the gaps and flaws that hinder transition investment. He then draws on industry best practices and recent regulatory developments to propose key areas for reform aimed at improving transition finance integration.
Whether concerned with navigating climate risk, identifying evidence-based investment strategies, or understanding the role of regulation in transition finance, this supplement offers valuable research perspectives to stay at the forefront of the profession and the top of the conversation
The first EDHEC Climate Institute issue of the Research Insights supplement to Investment & Pensions Europe proposes the following articles:
- Climate shocks or the death by a thousand cuts? The effect of climate change on the valuation of equity assets by Riccardo Rebonato, Senior Advisor, EDHEC Climate Institute and Professor of Finance, EDHEC Business School
- Why we need climate scenario probabilities and how to get them, by Riccardo Rebonato
- From global averages to local insights: Harnessing high-resolution data for climate risk assessment and resilience to physical shocks, by Nicolas Schneider, Senior Research Engineer – Macroeconomist, EDHEC Climate Institute
- Technological solutions to mitigate transition and physical risks: Introducing the infraTech2050 database, by Conor Hubert, Sustainability Research Engineer; Rob Arnold, Sustainability Research Director; Nishtha Manocha, Senior Research Engineer, EDHEC Climate Institute
- Charting a pathway for transition finance: Lessons from the EU framework, by Frédéric Ducoulombier, Research Programme Director, EDHEC Climate Institute
Related link:
IPE EDHEC Climate Institute special issue, Research Insights Supplement Spring 2025
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.
