How to Enhance Climate Scenarios for Investors
Existing climate scenarios, inspired by the IPCC framework, provide invaluable insights but were not designed for financial uses.
New research by EDHEC-Risk Climate Impact Institute explores approaches to enrich the existing framework with probabilistic information. This allows finance practitioners to both understand which outcomes are more likely and should therefore attract greater attention; and to get a better appreciation of what lies in the tails of the damage distribution. This has important practical investment implications for portfolio allocation and could also be used to refine valuation models to quantify and manage climate risks at a granular level.
Professor Riccardo Rebonato, Scientific Director and Doctor Dherminder Kainth, Research Director at EDHEC-Risk Climate Impact Institute, present findings from their latest foundational white paper titled “Climate Scenario Analysis and Stress Testing for Investors: A Probabilistic Approach", and answer the audience’s questions.
The webinar addresses the following issues:
- Why climate scenarios are important, and why they differ from market-risk scenarios
- Do current industry scenarios meet the needs of investors?
- Putting uncertainty centre stage: how to create probability distributions of economic damages
- Giving investors what they need: from probability distributions to probability-aware scenarios
- Reverse stress testing with climate damages
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.
