Climate and environmental risks: measuring the exposure of investments

Enrico Bernardini (), Johnny Di Giampaolo (), Ivan Faiella, Marco Fruzzetti (), Simone Letta (), Raffaele Loffredo () and Davide Nasti ()
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Enrico Bernardini: Bank of Italy
Johnny Di Giampaolo: Bank of Italy
Marco Fruzzetti: Bank of Italy
Simone Letta: Bank of Italy
Raffaele Loffredo: Bank of Italy
Davide Nasti: Bank of Italy

No 15, Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) from Bank of Italy, Directorate General for Markets and Payment System

Abstract: This paper presents a number of methodologies for assessing the climate risk exposure of several financial asset classes. Regarding government bonds, the paper proposes using public information; in order to develop forward-looking measures of countries’ risk exposure, the paper uses historical trends combined with governments’ climate commitments and the scenarios developed by the Network for Greening the Financial System. With regard to private sector issuers, the paper finds quite a high coverage and correlation amongst the carbon emissions data from different providers, while the divergences in the data for other environmental indicators are still significant. Finally, the paper shows that the application of sustainability criteria in the Bank of Italy’s investment strategy delivered a non-negligible reduction in the exposure to the climate and environmental risks of the portfolios.

Keywords: sustainable finance; investments; climate risks; environmental risks (search for similar items in EconPapers)
JEL-codes: E58 G11 Q56 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-ban, nep-ene, nep-env, nep-mac and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wpmisp:mip_015_21

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