The importance of compound risk in the nexus of COVID-19, climate change and finance

Irene Monasterolo (), Monica Billio and Stefano Battiston ()
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Irene Monasterolo: Vienna University of Economics and Business; Boston University's Global Development Policy Initiative; Ca' Foscari University of Venice
Stefano Battiston: Department of Economics, Ca' Foscari University of Venice; University of Zurich

No 2020:15, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: Current approaches to manage the COVID-19 pandemic have a narrow focus on public health and on the short-term economic and financial repercussions. This prevents us to look at how pandemic risk interplays with sustainable and inclusive development goals in the next decade. To fill this gap, we analyse how risk can compound in the nexus of non-linear interactions among pandemic, climate change and finance. We show that neglecting compound risk can lead to a massive underestimation of losses, which can be amplified by financial complexity, as well as to policies that impose unnecessary trade-offs among the economic recovery, health and climate objectives. To address these challenges, we propose an interdisciplinary research agenda to inform effective policies and improve the resilience of our socio-economic systems.

Keywords: COVID-19; climate change; financial interconnectedness; compound risk; loss amplification; resilience policies (search for similar items in EconPapers)
JEL-codes: G0 Q5 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2020
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (4)

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