Quotation Dunz, Nepomuk, Monasterolo, Irene, Raberto, Marco. 2018. Don’t forget climate sentiments: real and financial markets’ reactions to climate risks. EAEPE Annual conference, Nice , EAEPE, France, 06.09-08.09.


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Abstract

Policy makers and financial regulators are increasingly concerned about the impact of climate physical and transition risks on economic growth and financial stability. The introduction of timely and coherent climate policies, and sustainable finance instruments were recently advocated to mitigate such risks. However, their design and implementation are still unclear, and so are the potential and adaptive responses of the real economy and financial markets. Contributing to fill this gap, we further develop the EIRIN Stock-Flow Consistent behavioural model to assess how investors could react to the impact of stochastic climate-led disasters, as well as to the introduction of a carbon tax and green subsidies to address climate risks, accounting for their expectations on climate risks. Then, we analyse under which conditions investors’ climate sentiments play out and the implications for investments’ decarbonization. Our results show that investors’ climate sentiments could be a game changer in influencing portfolios’ reallocation toward green assets, thus amplifying climate policies’ impacts. Thus, the design and implementation of climate policies are crucial to foster a low-carbon transition while preventing strong distributive effects across households. Our results contribute to the discussion on what role could green fiscal, monetary policies and financial regulation play in the sustainability agenda.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Don’t forget climate sentiments: real and financial markets’ reactions to climate risks
Event EAEPE Annual conference, Nice
Year 2018
Date 06.09-08.09
Country France
Location EAEPE
URL http://dx.doi.org/10.2139/ssrn.3264181

Associations

People
Dunz, Nepomuk (Former researcher)
Monasterolo, Irene (Details)
External
Raberto, Marco (University of Genoa, Italy)
Organization
Institute for Ecological Economics IN (Details)
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