Understand what you measure: Where climate transition risk metrics converge and why they diverge

Julia Anna Bingler, Chiara Colesanti Senni and Pierre Monnin

Finance Research Letters, 2022, vol. 50, issue C

Abstract: Climate risks are financial risks. To help manage them, researchers and practitioners are exploring which metrics to use to assess climate risks, and to what extent the metrics delivers heterogeneous results. We analyze a unique dataset including risk assessments from 9 providers for firms of the MSCI World Index. Convergence between metrics is higher for the firms most exposed to transition risk. The underlying modeling assumptions and scenario characteristics are associated with changes in the estimated transition risk. Users of climate risk metrics should properly understand the key assumptions underlying a metric to appropriately interpret its result.

Keywords: Financial climate risks; Climate risk metrics; Transition risk; LASSO (search for similar items in EconPapers)
JEL-codes: C83 D53 D81 G12 G32 Q54 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004561

DOI: 10.1016/j.frl.2022.103265

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