Climate Financial Risks: Assessing Convergence, Exploring Diversity

CEP Discussion Notes 2020/6

27 Pages Posted: 23 Apr 2021

See all articles by Julia Anna Bingler

Julia Anna Bingler

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Chiara Colesanti Senni

ETH Zürich

Pierre Monnin

Council on Economic Policies

Date Written: December 2020

Abstract

Climate risks are now fully recognized as financial risks by asset managers, investors, central banks, and financial supervisors. As a result, the integration of climate risk metrics into risk management processes is moving up agendas worldwide. In that context, a rapidly growing number of market participants and financial authorities are exploring which metrics to use to capture climate risks, and to what extent the use of different metrics delivers heterogeneous results. This discussion note takes a first step in analyzing the convergence in assessments of climate-related transition risks across metrics providers, based on the ECB corporate bond portfolio. Our findings show that firms’ risk assessments across metrics are fairly heterogeneous but tend to converge on which firms are most and least exposed to transition risks. We also show that the temperature targets and time horizons underlying the metrics matter, although moderately, for the assessment of firms’ risk exposure and that providers using similar methodologies tend to deliver more convergent assessments. Our findings contribute to the growing recognition that asset managers, investors, central banks and financial supervisors can and should use available metrics to better integrate climate risks into risk management and financial supervision.

Suggested Citation

Bingler, Julia Anna and Colesanti Senni, Chiara and Monnin, Pierre, Climate Financial Risks: Assessing Convergence, Exploring Diversity (December 2020). CEP Discussion Notes 2020/6, Available at SSRN: https://ssrn.com/abstract=3826413 or http://dx.doi.org/10.2139/ssrn.3826413

Julia Anna Bingler (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Chiara Colesanti Senni

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland
+41766062605 (Phone)

HOME PAGE: http://www.resec.ethz.ch/people/person-detail.html?persid=220754

Pierre Monnin

Council on Economic Policies ( email )

Zurich
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
72
Abstract Views
294
rank
397,286
PlumX Metrics