Climate Change and the Macro-Economy: A Critical Review

Batten, Sandra

doi:10.2139/ssrn.3104554

Cited by 101 publications

(68 citation statements)

References 77 publications

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“…Finally, the 'Guidelines on reporting climate-related information' which refers to the additional costs or devaluation of assets due to changes in the regulation made with the purpose of reducing GHG emissions and adjusting to a low-carbon economy (Batten, 2018).…”

Section: Introductionmentioning

confidence: 99%

Carbon emissions and the cost of debt in the eurozone: The role of public policies, climate‐related disclosure and corporate governance

Palea

Drogo

2020

Bus Strat Env

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Over time, investors have become increasingly aware of the risks associated with a transition to a low-carbon economy. This study investigates the association between carbon emissions and the cost of debt financing for a sample of firms from the eurozone in the period 2010-2018. The results provide evidence that the risk premium required by lenders increases with carbon emissions. However, although the most polluting sectors were already charged before the Paris Agreement, and not further penalised in the subsequent period, our results indicate that the less polluting sectors started being charged a higher spread for their emissions only in the period after the Agreement. The Paris Agreement appears to be a turning point around which lenders have become aware of the strong commitment taken by policymakers in fighting climate change. Our findings also suggest that increased levels of disclosure on climate-related issues can mitigate corporate carbon risk. On the other hand, the results are not compelling when we consider the effect of control mechanisms, such as external verification for emissions, board oversight of carbon risk and the presence of emission reduction targets, on the cost of debt. Taken as a whole, the results demonstrate the effectiveness of public policies in driving lenders' allocation decisions as well as the role of climate-related disclosure in mitigating the corporate cost of capital. As such, our findings have important implications for both policymaking in environmental regulation and managerial strategies.

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Section: Introductionmentioning

confidence: 99%

Carbon emissions and the cost of debt in the eurozone: The role of public policies, climate‐related disclosure and corporate governance

Palea

Drogo

2020

Bus Strat Env

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“…Empirical studies have found that warming signi cantly reduces both operational and cognitive tasks of workers, thus lowering labour productivity (44; 45; 46; 1; 28). Likewise, evidence shows that climate change can a ect the stock and quality of capital directly -through crowding out -and indirectly -through extreme events (5). As the magnitude of climate change impacts is extremely uncertain (40), we perform an extensive sensitivity analysis around our central value based on estimates from (35).…”

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confidence: 99%

The public costs of climate-induced financial instability

et al. 2019

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“…Physical risks can affect both the supply and demand sides of the economy. On the supply side, natural disasters can disrupt business activity and trade and destroy infrastructure, diverting capital from technology and innovation to reconstruction and replacement [20]. It affects output levels and output growth by impacting labor productivity, speeding up the depreciation of capital stock, increasing cost of repair and replacement, and reducing funds allocated to research and innovation [21].…”

Section: Physical Risksmentioning

confidence: 99%

Climate Change, Credit Risk and Financial Stability

Oguntuase¹

2020

Banking and Finance

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Climate change is one of the greatest global challenges, posing an unprecedented challenge to the governance of global socioeconomic and financial systems. This chapter examines the climate change science and uncertainties associated with climate change, while identifying and explaining climate-related risks, the financial aspect of climate change, credit implications of climate change, integration of climate-related risks into credit risk assessment, and climate risk management. The chapter pays special attention to the triangular relationship between the three notions of climate-related risks, credit risk, and financial stability by enumerating the channels through which climate risks can cause credit risks and affect the stability of the financial system. Approaches to incorporate climate change into corporate risk management are also discussed.

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Climate Change and the Macro-Economy: A Critical Review

Cited by 101 publications

References 77 publications

Carbon emissions and the cost of debt in the eurozone: The role of public policies, climate‐related disclosure and corporate governance

Carbon emissions and the cost of debt in the eurozone: The role of public policies, climate‐related disclosure and corporate governance

The public costs of climate-induced financial instability

Climate Change, Credit Risk and Financial Stability

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