Transition Risks
The Transition Risk programme aims to quantify the financial impacts of climate risk related to a transition toward a low carbon economy. It is approached through a complete vision considering the specific geo-sectoral aspects: from technology, market (demand shifts, access barriers, price impacts), reputation (consumer loss, media, activism), to policy and legal risks (emissions pricing, litigation, compliance costs).
Transition risk assessment, traditionally focused on direct emissions and carbon tax implications, often overlooks the full scope of transition-related risks. This narrow view fails to address the broader challenges companies face in a transition toward a low-carbon economy. To better understand these risks, a comprehensive assessment of the entire value chain is necessary. This includes not only direct emissions but also the complexity of Scope 3 emissions, as well as indirect impacts across various sectors.
EDHEC Climate Institute (ECI) recognises this challenge as an opportunity to develop innovative methods for assessing transition risks in a holistic manner, addressing complexities at the geo-sectoral level and capturing the various trade-offs companies face during the transition. By improving how we quantify these risks, ECI aims to provide a clearer picture of the potential consequences of the transition to a low-carbon economy.
To effectively quantify transition risk, ECI will develop advanced climate-financial scenario analysis models that go beyond conventional emissions assessments. These models will integrate a variety of factors, including:
- Geo-Sectoral Challenges: Incorporating regulatory changes beyond carbon taxes, considering local policies, and addressing industry-specific obstacles that affect different sectors.
- Scope 3: Provide a reliable estimate of Scope 3 emissions and its potential financial impact distinguishing between upstream Scope 3 emissions (emissions from raw material extraction, production processes, and logistics) and downstream Scope 3 emissions (emissions generated from the use and disposal of sold products). This also means having a comprehensive view of sectoral supply chains and their related emissions.
- Climate sentiment: Develop AI-based tools to better quantify climate sentiment which can be representative of consumer choices and citizens’ concerns which lead to climate societal pressures driving regulation.
- Consumer Behaviour Models: Understanding changes in consumer preferences, such as a shift toward low-carbon products or substitutions that affect demand.
The experts
- Lionel Melin, Associate Researcher
- Betrand Jayles, Senior Sustainability Data Scientist
- Fabien Nugier, Senior Research Engineer
- Thomas Lorans, Senior Research Engineer
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.
