Business risk and the emergence of climate analytics
Addressing Climate Change Risk: CalPERS’ First Response to Senate Bill 964 (CalPERS, 2019).
Climate Change and Central Banks (Deutsche Bundesbank, 2019); https://www.bundesbank.de/en/press/speeches/climate-change-and-central-banks-812618
Fink, L. A Fundamental Reshaping of Finance. BlackRock https://www.blackrock.com/au/individual/larry-fink-ceo-letter (2020).
Climate Change & Sovereign Credit Risk (Moody’s, 2020); https://www.moodys.com/sites/products/ProductAttachments/Climate_trends_infographic_moodys.pdf
Government Pension Fund Global – Account of Work on Climate Risk (Norges Bank Investment Management, 2019); https://www.nbim.no/en/publications/submissions-to-ministry/2019/government-pension-fund-global–account-of-work-on-climate-risk/
The Big Picture on Climate Risk (S&P Global, 2020); https://www.spglobal.com/en/research-insights/featured/the-big-picture-on-climate-risk
BlackRock says investors need to assess climate change when investing. Reuters https://fortune.com/2016/09/06/blackrock-climate-change/ (6 September 2016).
Kerber, R. Vanguard seeks corporate disclosure on risks from climate change. Reuters https://br.reuters.com/article/us-vanguard-climate-idUSKCN1AU1KJ (14 August 2017).
Anderson, N. IFRS®Standards and Climate-Related Disclosures (IFRS, 2019).
Climate-Related and Other Emerging Risks Disclosures: Assessing Financial Statement Materiality Using AASB Practice Statement 2 (AASB, AUASB, 2018).
IOSCO Statement on Disclosure Of ESG Matters by Issuers (International Organization of Securities Commissions, 2019).
Proposals to Enhance Climate-Related Disclosures by Listed Issuers and Clarification of Existing Disclosure Obligations (Financial Conduct Authority, 2020).
Recommendations of the Task Force on Climate-related Financial Disclosures (Taskforce on Climate-related Financial Disclosures, 2017).
Climate-related Financial Disclosures: Understanding Your Business Risks and Opportunities Related to Climate Change (Ministry for the Environment & Ministry of Business, Innovation & Employment, 2019); https://www.mfe.govt.nz/sites/default/files/media/Climate%20Change/Climate-related-financial-disclosures-discussion-document.pdf
Chancellor sets out ambition for future of UK financial services. gov.uk https://www.gov.uk/government/news/chancellor-sets-out-ambition-for-future-of-uk-financial-services (9 November 2020).
The Macroeconomic and Financial Stability Impacts of Climate Change. Research Priorities (NGFS, 2020).
Macroeconomic and Financial Stability Implications of Climate Change (NGFS, 2019).
WS1 (Microprudential/Supervisory Workstream) Mandate and Workplan from 2018 to April 2020 (NGFS, 2018).
Statement by Governor Lael Brainard. The Federal Reserve https://www.federalreserve.gov/publications/brainard-comment-20201109.htm (9 November 2020).
IPCC Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation (eds Field, C. B. et al.) (Cambridge Univ. Press, 2012). This paper provides an excellent assessment of the state of climate change science and climate impacts in the context of physical climate risk.
Flato, G. et al. in Climate Change 2013: The Physical Science Basis (eds Stocker, T. F. et al.) 741–866 (IPCC, Cambridge Univ. Press, 2013).
Giorgi, F. & Gutowski, W. J. Regional dynamical downscaling and the CORDEX initiative. Annu. Rev. Environ. Resour. 40, 467–490 (2015).
Taylor, K. E., Stouffer, R. J. & Meehl, G. A. An overview of CMIP5 and the experiment design. Bull. Am. Meteorological Soc. 93, 485–498 (2012).
Eyring, V. et al. Overview of the Coupled Model Intercomparison Project Phase 6 (CMIP6) experimental design and organization. Geosci. Model Dev. 9, 1937–1958 (1937). A full description and explanation for the design of the CMIP6 experiments.
Bishop, C. H. & Abramowitz, G. Climate model dependence and the replicate Earth paradigm. Clim. Dyn. 41, 885–900 (2013).
Sanderson, B. M., Wehner, M. & Knutti, R. Skill and independence weighting for multi-model assessments. Geosci. Model Dev. 10, 2379–2395 (2017).
Physical Risk Framework. Understanding the Impacts of Climate Change on Real Estate Lending and Investment Portfolios (CISL, 2019).
Navigating a New Climate. Part 2: Physical Risks and Opportunities (Acclimatise, UNEP FI, 2018).
Carney, M. Breaking the Tragedy of the Horizon – climate change and financial stability. Bank of England https://www.bankofengland.co.uk/speech/2015/breaking-the-tragedy-of-the-horizon-climate-change-and-financial-stability (2015).
Understanding Physical Climate Risks and Opportunities (The Institutional Investors Group on Climate Change, 2020).
Climate-Related Financial Disclosure 2019 (Aviva, 2020).
O’Neill, B. C. et al. The scenario model intercomparison project (ScenarioMIP) for CMIP6. Geosci. Model Dev. 9, 3461–3482 (2016).
Hawkins, E. & Sutton, R. The potential to narrow uncertainty in projections of regional precipitation change. Clim. Dyn. 37, 407–418 (2011).
Kirtman, B. et al. in Climate Change 2013: The Physical Science Basis (eds Stocker, T. F. et al.) 953–1028 (IPCC, Cambridge Univ. Press, 2013).
Schneider, S. H. Integrated assessment modeling of global climate change: transparent rational tool for policy making or opaque screen hiding value-laden assumptions? Environ. Model. Assess. 2, 229–249 (1997).
Weyant, J. Some contributions of integrated assessment models of global climate change. Rev. Environ. Econ. Policy 11, 115–137 (2017).
Measuring the Real-World Costs of Climate Change. Climate Impact Lab https://www.impactlab.org/our-approach/ (accessed 19 March 2020).
Corporate Risk Screening. Four Twenty Seven http://427mt.com/wp-content/uploads/2017/10/427-Corporate-Product-Sheet-4.pdf (accessed 19 March 2020).
Clear, Present and Underpriced: The Physical Risks of Climate Change (Rhodium Group, 2019).
Scientific Methods – Outline. XDI Cross Dependency Initiative https://easyxdi.com/info/methods (accessed 19 March 2020).
Our Methodology. The Climate Service https://www.theclimateservice.com/methodology?hsCtaTracking=30cf5337-1451-4e4a-9fb6-bf802ca2dceb%7C4a944fde-7497-46b4-b016-0701dfbbbc52 (accessed 20 August 2020).
Jupiter Services. Jupiter https://jupiterintel.com/services/ (accessed 20 August 2020).
Keenan, J. M. A climate intelligence arms race in financial markets. Science 365, 1240–1243 (2019). A short article introducing the rapid advancement of proprietary climate service technologies, and the associated private and public policy implications.
Getting physical: assessing climate risks. BlackRock https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/physical-climate-risks (4 April 2019).
Four Twenty Seven Receives Majority Investment from Moody’s Corporation. Four Twenty Seven http://427mt.com/2019/07/24/four-twenty-seven-receives-majority-investment-from-moodys-corporation/ (24 July 2019).
Cusick, D. Tech offers a virtual window into future climate change risk. Scientific American (23 April 2019).
Adams, P. et al. Call for an Ethical Framework for Climate Services (WMO, 2015).
Hall, J. Probabilistic climate scenarios may misrepresent uncertainty and lead to bad adaptation decisions. Hydrol. Process. 21, 1127–1129 (2007).
Hewitson, B. C., Daron, J., Crane, R. G., Zermoglio, M. F. & Jack, C. Interrogating empirical-statistical downscaling. Climatic Change 122, 539–554 (2014).
Hazeleger, W. et al. Tales of future weather. Nat. Clim. Change 5, 107–113 (2015).
Stern, N. The structure of economic modeling of the potential impacts of climate change: grafting gross underestimation of risk onto already narrow science models. J. Econ. Lit. 51, 838–859 (2013).
Nissan, H. et al. On the use and misuse of climate change projections in international development. Wiley Interdiscip. Rev. Clim. Chang. 10, e579 (2019). A recent paper outlining issues associated with the use of climate models in guiding near-term local adaptation.
Pindyck, R. S. The use and misuse of models for climate policy. Rev. Environ. Econ. Policy 11, 100–114 (2017).
Chen, Y. S. & Chang, C. H. Greenwash and green trust: the mediation effects of green consumer confusion and green perceived risk. J. Bus. Ethics 114, 489–500 (2013).
Lyon, T. P. & Montgomery, A. W. The means and end of greenwash. Organ. Environ. 28, 223–249 (2015).
Burke, M., Hsiang, S. M. & Miguel, E. Global non-linear effect of temperature on economic production. Nature 527, 235–239 (2015).
Hsiang, S. et al. Estimating economic damage from climate change in the United States. Science 356, 1362–1369 (2017).
Hsiang, S. M. Temperatures and cyclones strongly associated with economic production in the caribbean and central america. Proc. Natl Acad. Sci. USA 107, 15367–15372 (2010).
Schlenker, W. & Roberts, M. J. Nonlinear temperature effects indicate severe damages to U.S. crop yields under climate change. Proc. Natl Acad. Sci. USA 106, 15594–15598 (2009).
Martinich, J. & Crimmins, A. Climate damages and adaptation potential across diverse sectors of the United States. Nat. Clim. Change 9, 397–404 (2019).
Lemoine, D. & Kapnick, S. A top-down approach to projecting market impacts of climate change. Nat. Clim. Change 6, 51–55 (2016).
Federal bonds. Deutsche Finanzagentur https://www.deutsche-finanzagentur.de/en/institutional-investors/federal-securities/federal-bonds/ (accessed 17 August 2020).
Auction Calendar Ministry of Finance, Japan https://www.mof.go.jp/english/jgbs/auction/calendar/2005e.htm (accessed 17 August 2020).
Treasury Offering Announcement (Department of the Treasury, 5 August 2020); https://www.treasurydirect.gov/instit/annceresult/press/preanre/2020/A_20200805_2.pdf
Arrow, K. et al. Determining benefits and costs for future generations. Science 341, 349–350 (2013).
Cropper, M. L., Freeman, M. C., Groom, B. & Pizer, W. A. Declining discount rates. Am. Econ. Rev. Pap. Proc. 104, 538–543 (2014).
Weitzman, M. Fat-tailed uncertainty in the economics of catastrophic climate change. Rev. Environ. Econ. Policy 5, 275–292 (2011).
Campiglio, E. et al. Climate change challenges for central banks and financial regulators. Nat. Clim. Change 8, 462–468 (2018).
Lamperti, F., Bosetti, V., Roventini, A. & Tavoni, M. The public costs of climate-induced financial instability. Nat. Clim. Change 9, 829–833 (2019).
Bernstein, A. et al. Disaster on the horizon: the price effect of sea level rise. J. Financ. Econ. 134, 253–272 (2019).
Palmer, T. & Stevens, B. The scientific challenge of understanding and estimating climate change. Proc. Natl Acad. Sci. USA 116, 24390–24395 (2019). A recent assessment of the need for a far more ambitious approach to climate modelling.
Cai, Y., Lenton, T. M. & Lontzek, T. S. Risk of multiple interacting tipping points should encourage rapid CO2 emission reduction. Nat. Clim. Change 6, 520–525 (2016).
Lenton, T. M. et al. Climate tipping points — too risky to bet against. Nature 575, 592–595 (2019).
Georgieva, A. & Sloggett, J. A Practical Guide to ESG Integration in Sovereign Debt (PRI, 2019).
Zhang, L., Xu, Y., Meng, C., Li, X. & Liu, H. Comparison of statistical and dynamic downscaling techniques in generating high-resolution temperatures in China from CMIP5 GCMs. J. Appl. Meteorol. Climatol. 59, 207–235 (2020).
Maraun, D. Bias correcting climate change simulations – a critical review. Curr. Clim. Chang. Rep. 2, 211–220 (2016).
Smith, D. M. et al. North Atlantic climate far more predictable than models imply. Nature 583, 796–800 (2020).
Váňa, F. et al. Single precision in weather forecasting models: an evaluation with the IFS. Mon. Weather Rev. 145, 495–502 (2017).
Shepherd, T. G. Storyline approach to the construction of regional climate change information. Proc. R. Soc. A 475, 20190013 (2019).
The 2021 Biennial Exploratory Scenario on the Financial Risks from Climate Change (Bank of England, 2019).
Bador, M. et al. Impact of higher spatial atmospheric resolution on precipitation extremes over land in global climate models. J. Geophys. Res. Atmos. 125, e2019JD032184 (2020).
Bruyère, C. et al. Severe Weather in a Changing Climate (IAG, NCAR, 2019).
Lenders’ Guide for Considering Climate Risk in Infrastructure (Acclimatise, Four Twenty Seven, Climate Finance Advisors, 2018).
Eceiza, J., Harreis, H., Härtl, D. & Viscardi, S. Banking imperatives for managing climate risk. McKinsey Insights https://www.mckinsey.com/business-functions/risk/our-insights/banking-imperatives-for-managing-climate-risk# (1 June 2020).
Schär, C. et al. Kilometer-scale climate models. Prospects and challenges article. Am. Meteorol. Soc. 101, 67–87 (2019).
O’Gorman, P. A. Precipitation extremes under climate change. Curr. Clim. Chang. Rep. 1, 49–59 (2015).
Porter, T. M. Trust in Numbers. The Pursuit of Objectivity in Science and Public Life (Princeton Univ. Press, 1996).
Thomas, K. A. & Warner, B. P. Weaponizing vulnerability to climate change. Glob. Environ. Chang. 57, 101928 (2019).
Mathiesen, K. Rating climate risks to credit worthiness. Nat. Clim. Change 8, 454–456 (2018).
Bauer, P., Thorpe, A. & Brunet, G. The quiet revolution of numerical weather prediction. Nature 525, 47–55 (2015).
Jung, T. et al. High-resolution global climate simulations with the ECMWF model in Project Athena: experimental design, model climate, and seasonal forecast skill. J. Climate 25, 3155–3172 (2012).
Haarsma, R. J. et al. High resolution model intercomparison project (HighResMIP v1.0) for CMIP6. Geosci. Model Dev. 9, 4185–4208 (2016).
Palmer, T. Build high-resolution global climate models. Nature 515, 338–339 (2014).
Shukla, J. et al. Toward a new generation of world climate research and computing Facilities. Bull. Am. Meteorol. Soc. 91, 1407–1412 (2010).
Global Framework for CLIMATE Services (WMO, accessed 7 July 2020); https://gfcs.wmo.int/
The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities (TCFD, 2017).
Summary of the Contributions to the HLEG on Sustainable Finance Consultation Document (High-Level Expert Group on Sustainable Finance, 2018).
Managing Climate Risk in the U.S. Financial System (Climate-Related Market Risk Subcommittee, 2020).
Sutton, R. T. Climate science needs to take risk assessment much more seriously. Bull. Am. Meteorol. Soc. 100, 1637–1642 (2019). A detailed explanation for the need to move beyond physical climate risk when assessing climate change.