The impact of climate transition risks on financial stability. A systemic risk approach.

Ferreiro, Javier Ojea; Reboredo, Juan C.; Ugolini, Andrea

doi:10.2139/ssrn.4203373

Cited by 3 publications

(2 citation statements)

References 20 publications

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“…We first need to know what those risks and opportunities are, recognizing that they will be specific to each enterprise and geographical context. Such risks have been broadly broken down in the literature into two categories: transitional and physical (Daumas, 2023; Ojea Ferreiro et al. , 2022; Sanderson and Stridsland, 2022).…”

Section: Climate Risks and Opportunitiesmentioning

confidence: 99%

Co-learning partnerships and carbon management in Denmark and Canada

Earley,

Stridsland,

Korn

et al. 2024

IJSHE

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Purpose Climate change poses risks to society and the demand for carbon literacy within small and medium-sized enterprises is increasing. Skills and knowledge are required for organizational greenhouse gas accounting and science-based decisions to help businesses reduce transitional risks. At the University of Copenhagen and the University of Northern British Columbia, two carbon management courses have been developed to respond to this growing need. Using an action-based co-learning model, students and business are paired to quantify and report emissions and develop climate plans and communication strategies. Design/methodology/approach This paper draws on surveys of businesses that have partnered with the co-learning model, designed to provide insight on carbon reductions and the impacts of co-learning. Data collected from 12 respondents in Denmark and 19 respondents in Canada allow for cross-institutional and international comparison in a Global North context. Findings Results show that while co-learning for carbon literacy is welcomed, companies identify limitations: time and resources; solution feasibility; governance and reporting structures; and communication methods. Findings reveal a need for extension, both forwards and backwards in time, indicating that the collaborations need to be lengthened and/or intensified. Balancing academic requirements detracts from usability for businesses, and while municipal and national policy and emission targets help generate a general societal understanding of the issue, there is no concrete guidance on how businesses can implement operational changes based on inventory results. Originality/value The research brings new knowledge to the field of transitional climate risks and does so with a focus on both small businesses and universities as important co-learning actors in low-carbon transitions. The comparison across geographies and institutions contributes an international solution perspective to climate change mitigation and adaptation strategies.

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Section: Climate Risks and Opportunitiesmentioning

confidence: 99%

Co-learning partnerships and carbon management in Denmark and Canada

Earley,

Stridsland,

Korn

et al. 2024

IJSHE

View full text Add to dashboard Cite

show abstract

“…Accomplishing these reduction goals needs a deliberate move towards a low-carbon economy at the regulatory level. This will directly impact the financial system and the economy (Monasterolo & De Angelis, 2019) since managing climate risk requires using various regulatory and other climate transition instruments such as macroprudential and monetary regulations targeted at enhancing the financial system's stability (Ojea Ferreiro, Reboredo, & Ugolini, 2022). This transition effort comes in the form of policy change (as exemplified by governmental carbon pricing) and technological or market changes.…”

Section: Introductionmentioning

confidence: 99%

Carbon Costs and Credit Risk in a Resource-Based Economy: Carbon Cost Impact on the Z-Score of Canadian TSX 260 Companies

Oyegunle¹,

Weber²,

Elalfy³

2023

JMS

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Climate risks and climate risk-related policies on carbon threaten the ability of economies to thrive and will impact the credit risk of many sectors, primarily high-emitting sectors. Higher credit risks will also affect lenders if their credit portfolios are exposed to climate change risks. The introduction of carbon pricing policies will exacerbate this threat in resource-based economies such as Canada. While some research exists on climate exposure and risks to lending portfolios, there is a knowledge gap on how carbon pricing impacts individual commercial credit risk. Consequently, this study analyzes the effect of different carbon pricing scenarios on Altman’s z-score. Using the Canadian TSX 260 data between 2010 and 2020 as a sample, this paper applied the costs of different carbon prices using the Canadian Government’s carbon price regime of $0 to $170 to analyze Altman’s z-score variables until 2030. The results suggest that carbon price will significantly impact the credit risk of companies in high-emitting industries, such as the energy sector. We conclude that climate policy exposure in the form of carbon costs will have a real impact on credit risk and that lenders must consider carbon emissions as part of their credit risk assessment.

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Financial stability, stranded assets and the low‐carbon transition – A critical review of the theoretical and applied literatures

Daumas

2023

Journal of Economic Surveys

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Transitioning to a low‐carbon economy will entail sweeping transformations of energy and economic systems. A growing research body has raised concerns about the effect of such strain on financial stability. This literature on “financial transition risk” has highlighted that the conjunction of climate policy, technological change and shifts in consumption patterns may propagate to financial markets. In extreme cases, these dynamics may result in a “Climate‐Minsky” moment with systemic implications. The field has developed quickly, covering many methods and research questions. While this expansion in literature is advantageous when studying a complex issue like the low‐carbon transition, it also comes with downsides. The large number of methods hampers result comparison, and the integration of research designs. It also makes it difficult to provide a synthetic view of results in the literature as well as identify remaining uncertainties. To bridge these gaps, I propose a critical review of the literature. I examine three sub‐fields: the asset stranding literature, the direct assessment of transition risks through prospective models and the financial empirics of the low‐carbon transition. I expound their main results, critically assess underlying methodologies and propose a framework to compare results. The review ends by suggesting some avenues for future research.

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The impact of climate transition risks on financial stability. A systemic risk approach.

Cited by 3 publications

References 20 publications

Co-learning partnerships and carbon management in Denmark and Canada

Co-learning partnerships and carbon management in Denmark and Canada

Carbon Costs and Credit Risk in a Resource-Based Economy: Carbon Cost Impact on the Z-Score of Canadian TSX 260 Companies

Financial stability, stranded assets and the low‐carbon transition – A critical review of the theoretical and applied literatures

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