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Potential Climate Risks in Financial Markets: A Literature Overview

Ingrid Hjort ()
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Ingrid Hjort: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

No 01/2016, Memorandum from Oslo University, Department of Economics

Abstract: This literature overview conducts a systematic study of how the climate related risks from global warming may aff ect fi nancial markets. The climate related risk is divided into three subcategories, the environmental uncertainty, the economic climate risk and the climate policy risk, which all of them may aff ect the markets directly or indirectly. The perspective is broad, including production possibilities, productivity, social disturbance, health, migration and trade. Stock prices are affected by beliefs about future path of expected return. Climate change signifi es possible disruptions in production and consumption possibilities, which may imply reduction in future asset values. Expectations of this will reduce asset values today. There are few studies in the research literature that explicitly attempt to identify mispricing. The survey compares di fferent event studies that may reflect how the financial market react to the climate related risks. The empirical evidence is mixed, and few general conclusions can be drawn. It is unclear whether the market reactions are consistent with rational market valuation of the climate risk.

Keywords: climate change; climate risk; climate policy risk; fi nancial markets; stranded assets; divestment (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G32 Q54 Q58 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2016-02-01
New Economics Papers: this item is included in nep-env, nep-fmk and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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