Taming the Green Swan: a criteria-based analysis to improve the understanding of climate-related financial risk assessment tools

Bingler, Julia Anna; Senni, Chiara Colesanti

doi:10.1080/14693062.2022.2032569

Cited by 27 publications

(18 citation statements)

References 45 publications

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“…Interviewees C2.1-2 pointed out that transition risk assessment results depend significantly on the tools used (Bingler & Senni, 2022). In transition risk, the reputation component presents challenges for accurate assessment and quantitative presentation.…”

Section: High Uncertainty In Transition Risk Assessmentmentioning

confidence: 99%

“…Financial and corporate regulators should ensure that mandatory climate risk disclosures are understandable and comparable. Regulators should require companies to disclose their risks using a unified climate risk indicator disclosure template to ensure that key assumptions, model settings, analytical limitations, and analytical uncertainties are publicly disclosed along with indicators (Bingler & Senni, 2022).…”

Section: Corporate Climate-related Riskmentioning

confidence: 99%

“…These are unintended consequences of the growing and unsupervised use of the vast amounts of complex open information generated by climate models. Focusing on climate‐related financial transition risks, Bingler and Senni (2022) proposed a set of analytical standards rooted in climate science, economics, finance and risk management to assess whether climate transition risk analysis tools provide high‐quality, comparable and decision‐relevant results. From a sample of 16 climate transition risk tools, some performed well on all criteria, but considerable improvement is still needed in terms of model transparency, scenario flexibility, output‐related uncertainty and communication of assumptions.…”

Section: Physical and Transition Risk Assessment Toolsmentioning

confidence: 99%

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How does the research community contribute to corporate climate‐related risk disclosures? The gap between ideals and reality

Lee

Kuo

Hsu

et al. 2022

Corp Soc Responsibility Env

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Since the inception of the Task Force on Climate Related Financial Disclosures (TCFD) and its publication of a series of guidelines to instruct companies how to respond to climate change, physical and transition risks have become must-know terms for businesses around the world. The development of various physical and transition risk assessment tools has become an urgent task for not only climate service companies but also for the scientific research community. Nevertheless, there is still an obvious gap between the contribution of the scientific research community and enterprise needs for clarification of the TCFD requirements. This article draws on interviews from representatives of more than a dozen related corporations and institutions in Taiwan, including private firms, research units, and industry associations, to understand and summarize their experience and expectations for the research community's contributions to TCFD alignment. The interview findings point out that physical risk assessment, transition risk assessment, data/information disclosure and integration, and policies and systems are the most concerned aspects of the interviewees. Based on these findings, the paper then provides suggestions for improvement by the research community, policy makers, and decision makers, including appropriate policies and systems, localized high-quality climate services, and international competition, helping to effectively bridge the gap between daily research work and external expectations for the research results.

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Section: High Uncertainty In Transition Risk Assessmentmentioning

confidence: 99%

Section: Corporate Climate-related Riskmentioning

confidence: 99%

Section: Physical and Transition Risk Assessment Toolsmentioning

confidence: 99%

See 1 more Smart Citation

How does the research community contribute to corporate climate‐related risk disclosures? The gap between ideals and reality

Lee

Kuo

Hsu

et al. 2022

Corp Soc Responsibility Env

View full text Add to dashboard Cite

show abstract

“…Undoubtedly, the changes induced by a transition to a net-zero economy will cause adjustments in firms' valuations which may contribute to the deterioration of firms' creditworthiness and ultimately translate to higher credit risk (BIS, 2021;Bingler and Senni, 2022). Evaluation of firms' exposure to carbon risk involves quantifying the effort necessary to successfully transition to a low-carbon economy.…”

Section: Introductionmentioning

confidence: 99%

Carbon Default Swap - Disentangling the Exposure to Carbon Risk Through CDS

2022

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“…Rather, exposure depends on the specific characteristics of portfolio holdings and how they are inserted into geographic, temporal and technological assumptions and narratives (Köberle et al 2020). A recent assessment of 16 financial risk tools found none of them fully met standards for coverage, usability and transparency (Bingler and Senni 2022).…”

Section: Introductionmentioning

confidence: 99%

Financial risks to coal value chain from a cost-conscious shift to renewables in India

Köberle

Shrimali²,

Mittal³

et al. 2022

Environ. Res. Lett.

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A realignment of the financial sector is necessary to both enable the energy system transformation and manage financial risks implied by a transition to net-zero emissions. These include transition risks stemming from policies that limit or price greenhouse gas (GHG) emissions. The financial sector has turned to scenarios developed by the research community for information on how transitions may unfold. Emerging methodologies linking transition scenarios to risk assessment are in their early stages but are key to enable financial institutions (FIs) to carry out the task at hand. Commercial FIs are exposed to transition risks primarily through their portfolio holdings and how assets therein may fare in a transition. Understanding this counterparty risk is key for development and interpretation of climate-financial scenarios. FIs will need to consider how the firms in a portfolio – the counterparties – will react to the transition and their capacity to navigate the changes involved. Here we apply a transparent and flexible framework to explore transition risks to corporate firms from low-carbon transition scenarios. We show that considering firms’ strategic responses to the changes in their operating environment is an important determinant of the resulting transition risk estimates. We provide an illustrative case study of the coal value chain in India to demonstrate how the framework can be applied to both risk assessment and business strategy setting.

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Taming the Green Swan: a criteria-based analysis to improve the understanding of climate-related financial risk assessment tools

Cited by 27 publications

References 45 publications

How does the research community contribute to corporate climate‐related risk disclosures? The gap between ideals and reality

How does the research community contribute to corporate climate‐related risk disclosures? The gap between ideals and reality

Carbon Default Swap - Disentangling the Exposure to Carbon Risk Through CDS

Financial risks to coal value chain from a cost-conscious shift to renewables in India

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