 An analytic framework for assessing the impacts of physical risk through a (climate-related) expected shortfallFabio Piluso, Eugenia Strano and Danilo Ceraso International Review of Economics & Finance, 2025, vol. 103, issue C Abstract: This paper introduces a novel measure, that is the climate-related Expected Shortfall, employing a quadratic damage function to capture the nonlinear effects of global warming on economic losses. We find a contrasting geographical pattern: as global warming rises, welfare economic losses in Central Europe (Southern) increase, whilst losses at lower southern latitudes decrease due to the nonlinear effect of climate tipping damage. Additionally, we demonstrate that the ES model is a more coherent measure compared to the VaR model, which lacks the subadditivity axiom and overlooks the “hidden” risks. The results offer a forward-looking tool for regulators and policymakers, enhancing our understanding of practical solutions for measuring climate-related financial risks and encouraging further research in this field. Keywords: Climate change; Climate-related financial risks; Physical risks; Climate risks measurement; Environmental finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025005209 DOI: 10.1016/j.iref.2025.104357 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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