Climate Change and Financial Risk

What Can Machine Learning Teach Us about Australian Climate Risk Disclosures?

“…The risk of a carbon bubble (the hypothesized bubble in the valuation of companies dependent on fossil-fuel-based energy production) has increased the desire of stakeholders to be able to evaluate a firms' carbon exposure as a measure of their climate risk exposure [15]. The ability to evaluate the level of climate risk that firms are exposed to has traditionally been difficult due to a lack of transparency from firms [16]. Firms themselves are often unaware of their own exposure to a variety of climate risks due to a lack of tools to evaluate risks with radical uncertainty and non-normal probability distributions [16].…”

“…The ability to evaluate the level of climate risk that firms are exposed to has traditionally been difficult due to a lack of transparency from firms [16]. Firms themselves are often unaware of their own exposure to a variety of climate risks due to a lack of tools to evaluate risks with radical uncertainty and non-normal probability distributions [16].…”

“…Corporate environmental reporting began in the 1980s, focusing on a firms impacts on the environment through metrics such as environmental pollution [20]. Current CRD practice was precipitated by Article 173 of the 2015 French Energy Transition Act, which required compulsory disclosure on climate change from financial institutions and nonfinancial companies in France [16]. Article 173 did not require firms to take action on the risks they disclosed, and subsequent reviews have found that the quality and robustness of disclosures are variable and that the risk assessment methodologies employed to align with the law were diverse [16,21].…”

Climate Risk and Financial Instability in Asia-Pacific

“…The focus of previous research has extensively been on the impact of climate-related risks on different aspects of the economy, such as agriculture (Luck et al, 2011), productivity (Belsie, 2015), labour productivity, supply (Dasgupta et al, 2021), and its relationship with the financial sector; see Dafermos et al (2018), Lamperti et al (2021), Semieniuk et al (2021), Battiston et al (2021), Chenet (2021), and Gregory (2021). Given that the effect of climate risk on financial instability can stem from the volatilities and bankruptcies arising from climate shocks that borrowing firms suffer (Lamperti et al, 2021), thus consequently affecting the lending financial institutions, the Asia-Pacific region has adopted several measures to mitigate the possible negative effects of climate-related risks.…”

The role of financial inclusion and FinTech in addressing climate-related challenges in the industry 4.0: Lessons for sustainable development goals

“…Many central banks, financial regulators, and ministries of finance in emerging and developing economies are concerned about climate change and environmental challenges. The reality that central banks and financial regulators in emerging and developing countries have a policy mission that covers 85% of the world's unbanked population, or nearly 1.7 billion people, is one of the causes driving this worry (International Monetary Fund, 2019;Banna et al, 2021;Chenet, 2021). Environmental disasters are harming around 200 million people because of the detrimental effects of climate change, resulting in billions of dollars in annual costs to the worldwide economy (United Nations Environment Programme, 2019Benni, 2021;NOAA National Centers for Environmental Information, 2021).…”