Are insurance balance sheets carbon-neutral? Harnessing asset pricing for climate change policy†

Alexander Braun (), Sebastian Utz () and Jiahua Xu
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Alexander Braun: University of St. Gallen
Sebastian Utz: University of St. Gallen

The Geneva Papers on Risk and Insurance - Issues and Practice, 2019, vol. 44, issue 4, No 1, 549-568

Abstract: Abstract Due to its enormous size and capital base, the insurance industry has the potential to play a key role in countering climate change. To this end, the major capital flows associated with its investment and underwriting businesses would need to be redirected towards carbon-neutral activities. Since insurance companies can be viewed as large portfolios consisting of financial risks (asset side) and underwriting risks (liability side), we suggest an asset pricing approach to detect carbon-intensive positions on their balance sheets. The framework should be accompanied by two simple policy changes to reinforce its effectiveness.

Keywords: Climate change; Sustainable insurance; Carbon emissions; Asset pricing (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41288-019-00142-w

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