Climate Exposure Tool for Financial Risk Analysis


Type Research Project

Funding Bodies
  • EU Horizon 2020

Duration April 1, 2019 - April 1, 2020

  • Institute for Ecological Economics IN (Details)

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Abstract (English)

FETOPEN-03-2018-2019-2020 (CSA) - FET Innovation Launchpad.
One of the most important developments occurring in the financial sector is a rapidly growing demand by financial companies for data and tools to estimate their financial exposure to climate risks. However, the market there is currently no product or service that can deliver a credible, science-based, quantitative information on how much companies and the financial assets they issue are exposed to climate risks. CLIMEX meets the growing demand from financial companies to assess the climate financial risks they face by bringing to the market the “Climate-Finance Stress-testing”, an innovation resulting from the FET research Project DOLFINS. In particular, we build on the climate-finance stress-testing methodology to deliver a B2B commercial tool for financial risk managers that allows them to price climate risks in their portfolio management strategies. Our innovation combines the analysis of large datasets on financial and industrial relationships with new financial network algorithms to estimate the propagation of climate shocks towards firms and the resulting impacts on financial assets. It can thus provide detailed quantitative information about the exposure to climate risks of individual firms, financial assets, portfolios of financial assets or financial institutions. Hence, it allows to introduce climate risks into standard financial risk metrics (e.g. a climate Value-at-Risk) and transform climate-related data into financial data and analytics.

Partners

  • Paris School of Economics - France
  • UZH - Switzerland

Publications