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Financial decisions worldwide are increasingly influenced by the scarcity of resources, and the physical and transition risks associated with climate change. The extent of the environmental impact from climate change is still uncertain but the recent scientific evidence is increasingly worrisome and many governments are taking decisive steps in order to avert a catastrophe. The transition towards a low-carbon economy requires a broad array of financial instruments and innovations that will have far-reaching implications for markets, corporations, intermediaries, and investors.

As part of our effort to help investors and asset managers adequately deal with these new risk factors, EDHEC-Risk Institute has launched an ambitious programme that will explore the impact of climate change on asset prices and examine the measurement and management of climate-related risks in investors’ portfolios. On June 9 2020, the EDHEC Business School joined the Global Research Alliance for Sustainable Finance and Investment (GRASFI), the global network for cutting-edge research on sustainable finance and investment. 

Impact on Climate Change of Financing and Investment Decisions

Recent evidence sheds light on the magnitude and pervasiveness of climate risks exposure for households, corporates, banks and global investors. The scale of these risks is substantial and possibly larger even than those that triggered the financial crisis. Besides measuring and acting on climate risks, the global financial system will be crucial in channelling capital towards green assets, especially to generate clean power. As part of our effort to help financial actors assess the risks and opportunities of the climate transition, EDHEC-Risk Institute is launching an ambitious research programme on climate-footprint metrics, clean energy financing and valuation tools for climate-related investments.

In Video : Are Finance and Sustainability really compatible

In Illustration (GIF) : The impact on climate change of financial decisions

This programme is led by Gianfranco Gianfrate, Professor of Finance, EDHEC Business School. He writes and researches on sustainable finance, socially responsible investing, climate change finance, carbon pricing. Prior to joining EDHEC Business School, he held teaching and research positions at Erasmus University, Harvard University, and Bocconi University. Gianfranco also has extensive experience in the financial industry, having worked, among others, for Deloitte Corporate Finance, Hermes Investment Management, and iStarter.

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Impact of Climate Change on Asset Prices and Risk Management

 

It is still not clear how decisive climate control efforts will be in the coming decades. If little is done, the damage to the planet and, as a consequence, to the economy may be very severe. If, on the other hand, decisive action is taken, the redirection of resources to climate change abatement will have to be on a war-effort scale. And there are, of course, lots of intermediate outcomes. Each of these ‘possible worlds’ will have an impact on the returns one can expect from financial assets. Assets distribute to investors what the economy produces after labour has received its share. Therefore, the chosen abatement path will have an obvious first-order impact on asset returns. In addition to this, the transformative nature of the resource allocation called for by a decisive abatement effort will give rise to major differences in the returns of different asset classes, which in turns has profound implication for risk and asset allocation decisions.

This programme is led by Riccardo Rebonato, Professor of Finance at EDHEC Business School, a specialist in interest rate risk modelling with applications to bond portfolio management and fixed-income derivatives pricing. He was previously Global Head of Rates and FX Research at PIMCO. He has published extensively on the use of Bayesian nets for stress testing and asset allocation. His past academic experience in the hard sciences (physics & nuclear engineering) is a unique asset in the adaptation of the existing IAMs to the task at hand.

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On the Resilience of ESG Stocks during COVID-19: Global Evidence

2021

Gianfranco Gianfrate, Tim Kievid and Mathijs van Dijk


Determinants of internal carbon pricing

2020

Nuno Bento, Gianfranco Gianfrate


National Climate Policies and Corporate Internal Carbon Pricing

2020

Nuno Bento, Gianfranco Gianfrate , Joseph E. Aldy


Climate Change and Credit Risk

2020

Giusy Capasso, Gianfranco Gianfrate, Marco Spinelli


Future-Proof Your Climate Strategy

2019

Joseph E. Aldy, Gianfranco Gianfrate


Handbook of Green Finance

2019

Jeffrey Sachs, Wing Thye Woo, Naoyuki Yoshino, Farhad Taghizadeh-Hesary

EDHEC-Risk Institute aspires to associate its research efforts on sustainable finance and more specifically on Incorporating ESG factors in investment decisions with a major name from the industry and welcomes sponsorship to conduct a research chair. Research chair involves a close partnership with the financial sponsor and a commitment from EDHEC-Risk to publishing related articles in international academic journals as well as to releasing the research results to the investment management profession through wide distribution of practitioner-oriented publications and presentations at industry conferences.

An EDHEC-Risk Institute research chair therefore enables its sponsor to support high quality, independent research that will be made public; this is an ideal way to demonstrate organisation’s interest and commitment to the finance of climate change.

If you are interested in discussing further research chair opportunities, please contact: Maud Gauchon on +33 (0)4 93 18 78 87 or at maud.gauchon@edhec-risk.com