Climate change and the need to take action to adapt our economic system towards renewable energies is the dominating theme of this decade and beyond. Climate change and the energy transition pose important challenges for many firms, for entire economic sectors, and for our economies as a whole. There is an urgent need for risk quantification to underpin action in the public and private sectors. This is crucial to ensure adequate pricing of assets early on, to avoid climate change or transition-induced financial disruption, and to inform policy makers of the optimal path to choose for climate transition.
The ESRB and ECB, and indeed central banks and financial regulators and supervisors worldwide, have therefore mobilized their resources to improve the measurement and modelling of climate-related risk for banks but also other segments of the financial sector, such as insurance firms and investment funds.
This e-lecture gave an overview of the state of play but also of important open issues yet to be solved.
Irene Monasterolo, Professor of Climate Finance at EDHEC-Risk Institute brings her insights on the papers presented and additional perspectives on open issues and ongoing research in the field: climate risks, transitions risk, stress testing, climate sentiments...