Understand what you measure: where climate transition risk metrics converge and why they diverge

Journal article

Climate risks are financial risks. To help manage them, researchers and practitioners are exploring which metrics to use to assess climate risks, and to what extent the metrics delivers heterogeneous results. We analyze a unique dataset including risk assessments from 9 providers for firms of the MSCI World Index. Convergence between metrics is higher for the firms most exposed to transition risk. The underlying modeling assumptions and scenario characteristics are associated with changes in the estimated transition risk. Users of climate risk metrics should properly understand the key assumptions underlying a metric to appropriately interpret its result.

Authors: Bingler, JA; Senni, CC; Monnin, P

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Elsevier
• Journal: Finance Research Letters
• Volume: 50
• Article number: 103265
• Publication date: 2022-09-05
• Acceptance date: 2022-08-19
• DOI: 10.1016/j.frl.2022.103265
• EISSN: 1544-6131
• ISSN: 1544-6123
• Language: English
• Keywords: LASSO; financial climate risks; FFR; climate risk metrics; transition risk