Anthony Janetos, the Director of the Frederick S. Pardee Center for the Study of the Longer-Range Future, and Irene Monasterolo, a Visiting Research Fellow, recently co-authored a paper on climate-related financial disclosure in the journal Climatic Change. The paper, titled “Vulnerable yet relevant: the two dimensions of climate-related financial disclosure,” proposes two novel indices to identify financial actors who are “vulnerable yet relevant” to climate change policies.
The authors first identified two investment caveats to market-based approaches to smoothly transitioning to a low-carbon economy: imperfect information about the exposure of portfolios to climate-related risks and a lack of common measures of exposure. To address these limiting factors, they develop two indices: “greenhouse gas exposure,” which captures a portfolio’s exposure to energy transition risks, and “greenhouse gas holding,” which captures an actor’s contribution to GHG emissions. They go on to illustrate the use of these indices on a dataset of portfolios in the Euro-Area in 2014, and discuss the policy implications of climate policies for industrial companies, investment funds, governments, and other actors.
Click here to download the paper.