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Over the past months, I worked with >30 others from industry & academia as a member of the CFTC’s Climate-Related Market Risk Subcommittee
Today, we released a report on climate change’s impact on financial markets
Some thoughts on the content + process https://www.nytimes.com/2020/09/08/climate/climate-change-financial-markets.html
Today, we released a report on climate change’s impact on financial markets
Some thoughts on the content + process https://www.nytimes.com/2020/09/08/climate/climate-change-financial-markets.html
The report concludes that climate change poses a substantial risk for the U.S. financial system, and makes a number of important (and wide-ranging) policy recommendations.
Why does this matter? Even though the human toll of climate change should be motivation enough to ACT NOW, the behavior of financial market participants can be powerful.
Example: By reducing the cost of capital for renewable energy (and increasing it for coal), investors can indirectly affect the path of climate change.
The report discusses many channels through which climate change threatens the financial system. One of the most immediate is through real estate and mortgage markets.
I’ve summarized some research on this channel here before:
https://twitter.com/stroebel_econ/status/1274803221580713984?s=20
I’ve summarized some research on this channel here before:
https://twitter.com/stroebel_econ/status/1274803221580713984?s=20
One of the central policy recommendations is the need to put a price on carbon.
This is a powerful recommendation from a government-commissioned report during the Trump administration, and a committee with reps from BP and ConocoPhilipps (in addition to academics and reps from the finance industry).
https://www.cftc.gov/About/CFTCCommittees/MarketRiskAdvisoryCommittee/mrac_subcommitteemembers.html
https://www.cftc.gov/About/CFTCCommittees/MarketRiskAdvisoryCommittee/mrac_subcommitteemembers.html
Some of our other policy recommendations center on requirements for banks to conduct climate stress tests.
In order for these to work, we need much better climate risk disclosures by firms.
In order for these to work, we need much better climate risk disclosures by firms.
Even though “E-Scores” seem to capture some of these risk exposures, much more work is needed https://twitter.com/stroebel_econ/status/1274803239372886021?s=20
Even though there are some things about the interaction of climate risk and financial markets that we understand, much more is uncertain.
This provides a huge opportunity for PhD students wanting to work in a quickly growing and important area of finance.
This provides a huge opportunity for PhD students wanting to work in a quickly growing and important area of finance.
Link to the full report is here:
https://www.cftc.gov/sites/default/files/2020-09/report%20of%20the%20Subcommittee%20on%20Climate-Related%20Financial%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf
https://www.cftc.gov/sites/default/files/2020-09/report%20of%20the%20Subcommittee%20on%20Climate-Related%20Financial%20Market%20Risk%20-%20Managing%20Climate%20Risk%20in%20the%20U.S.%20Financial%20System%20for%20posting.pdf
For those interested in learning more about the academic research frontier in climate finance, I encourage you to sign up here.
Presentations by: @m_maggiori, @StefanoGiglioEc, @paulgp, Zac Sautner, Nancy Wallace, @mattkahn1966 https://twitter.com/stroebel_econ/status/1288840829013037056?s=20
Presentations by: @m_maggiori, @StefanoGiglioEc, @paulgp, Zac Sautner, Nancy Wallace, @mattkahn1966 https://twitter.com/stroebel_econ/status/1288840829013037056?s=20
I am also chairing a @cepr_org panel at 11.30ET on “Climate Change: Financial Implications for Households”
@Blitterman, @StefanoGiglioEc @YaleSOM, Nancy Wallace @BerkeleyHaas, and @NatKeohane @EnvDefenseFund https://cepr.org/event/cepr-tfi-event-climate-change-financial-implications-households
@Blitterman, @StefanoGiglioEc @YaleSOM, Nancy Wallace @BerkeleyHaas, and @NatKeohane @EnvDefenseFund https://cepr.org/event/cepr-tfi-event-climate-change-financial-implications-households
Bob and Nat were co-authors of the report, Follow live on YouTube
