[MCN] Confirmed, again: Climate change puts pension funds, other money at risk

[Lance Olsen]

 <https://www.eurekalert.org/pub_releases/2017-04/uoz-ati041117.php>Assessing the impact of climate risks on the financial system
UNIVERSITY OF ZURICH
 <https://www.eurekalert.org/pub_releases/2017-04/uoz-ati041117.php>Public Release: 11-Apr-2017 <https://www.eurekalert.org/pub_releases/2017-04/uoz-ati041117.php>
Climate change brings new risks for financial investments, in particular for pension funds. An international research team coordinated by the University of Zurich has developed a 'climate stress-test' for financial institutions. Results suggest that while better disclosure of climate-relevant financial information can improve risk estimation, the early introduction of stable climate policies is needed to mitigate risk.

JOURNAL
Nature Climate Change
Abstract
http://www.nature.com/nclimate/journal/v7/n4/full/nclimate3255.html <http://www.nature.com/nclimate/journal/v7/n4/full/nclimate3255.html>
The urgency of estimating the impact of climate risks on the financial system is increasingly recognized among scholars and practitioners. By adopting a network approach to financial dependencies, we look at how climate policy risk might propagate through the financial system. We develop a network-based climate stress-test methodology and apply it to large Euro Area banks in a ‘green’ and a ‘brown’ scenario. We find that direct and indirect exposures to climate-policy-relevant sectors represent a large portion of investors’ equity portfolios, especially for investment and pension funds. Additionally, the portion of banks’ loan portfolios exposed to these sectors is comparable to banks’ capital. Our results suggest that climate policy timing matters. An early and stable policy framework would allow for smooth asset value adjustments and lead to potential net winners and losers. In contrast, a late and abrupt policy framework could have adverse systemic consequences.

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“Perhaps the most obvious proposed risk factor for extinction is large body size.”

“One secure prediction is that future environmental conditions will almost certainly differ from those in the past.”

“Diversity will almost certainly rebound after the current extinction event; however, it may be composed of species descended from a different, as yet unknown, subset of lineages from those that dominate now, and humans will likely not be included among them.”

Davies, et al. “Phylogenetic trees and mammalian biodiversity.” Proceedings National Academy of Sciences, Aug. 12, 2008. Eight pages.

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