Climate risks and the practice of corporate valuation

Bianchini, Roberto; Gianfrate, Gianfranco

doi:10.4337/9781786432636.00032

Cited by 8 publications

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“…First, the internal pricing of carbon is used for risk management purposes: as companies are increasingly exposed to regulatory and financial risks attached to the implementation of governmental carbon pricing regimes, they seek to measure, model, and manage such risks. Internal pricing of carbon allows investors to assess the extent to which companies' activities (especially from high polluting sectors) are vulnerable to increasing carbon costs (Bianchini and Gianfrate, 2018). Second, internally defined prices of carbon are featured in strategic planning activities as carbon price is an important input in the definition of the long term business model, including the identification of new strategic risks and opportunities.…”

Section: Introductionmentioning

confidence: 99%

Determinants of internal carbon pricing

Bento

Gianfrate

2020

Energy Policy

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Action against climate change is urgent and requires the participation of firms. The progressive internalization of carbon costs by firms is essential in the transition to a low-carbon economy. Internal carbon pricing is an emerging set of practices voluntarily adopted by companies to embed climate footprint in operations and business models. We explore the factors that explain the adoption of internal carbon prices (ICP) among global companies reporting to the Carbon Disclosure Project between 2015 and 2017. We specifically test whether the macroeconomic, regulatory, industry, and firmspecific characteristics affect the disclosed level of the ICPs. Results show that the ICPs depend to a large extent on the national climate policy, country's development, industry, and corporate governance. Furthermore, context explain more the differences in ICP than industry and firm-specific characteristics. Thus uncertainties around countries' climate policy hampers carbon pricing in business. These findings shed light on the factors that contribute to the dissemination of carbon pricing in society.

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Section: Introductionmentioning

confidence: 99%

Determinants of internal carbon pricing

Bento

Gianfrate

2020

Energy Policy

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“…166 Physical risks, such as natural catastrophes (particularly storms, wildfires, flooding, drought, heavy precipitation), 167 and changing climate conditions (such as the rise in sea levels and temperatures, land aridification, ocean acidification, pollution, loss in biodiversity) can affect the valuation of assets, the price of goods and services, and labour productivity. 168 For instance, the rise in sea levels will directly affect the valuation of real estate and housing prices in coastal areas. 169 Heavy precipitation will reduce agricultural crop and food security.…”

Section: The Financial Nature Of Climate Risksmentioning

confidence: 99%

Turning Gold Into Green: Green Finance In The Mandate Of European Financial Supervision

Arriba-Sellier¹

2021

COLA

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Following the Paris Agreement and pursuant to its objective of reordering financial flows to ensure climate change mitigation and adaptation, green finance has become a legislative priority for the European Union. This was illustrated by a unique, albeit limited, change in the mandate of the European Supervisory Authorities. This article takes this amendment as a starting point to discuss the responsibility of supervisory authorities in facing climate change. Despite clear limits stemming from Union law, a broad legal analysis sheds light on obligations for supervisory authorities across Europe to consider climate change as part of their mandate. This finding is supported by the growing recognition of climate change as a source of financial risks. Consequently, the mandate of European financial supervision is turning green, regardless of a legislative intervention.

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“…Third, companies can also look to gain a competitive advantage in a future in which climate policies could affect operating conditions or technical systems. Finally, ICP adoption could trigger and drive investments toward low‐carbon technologies, identifying new markets and factoring ICP into capital allocation decisions among investments generating significant GHG emissions (Abe et al, 2015; Bartlett et al, 2017; Bianchini & Gianfrate, 2018; I4CE, 2016).…”

Section: Introductionmentioning

confidence: 99%

Climate change exposure and internal carbon pricing adoption

et al. 2022

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Governments and corporations around the world are increasingly pressured to manage climate‐related business risks and reduce their carbon footprint. Consequently, a growing number of corporations have started implementing internal carbon pricing (ICP) programs, assigning a monetary value to their carbon emissions as a mitigation and adaptation mechanism. This paper explores the motives underlying voluntary ICP adoption and examines whether a firm's exposure to climate‐related risks is a relevant driver of ICP adoption. Using a worldwide sample of firms reporting to the Carbon Disclosure Project between 2016 and 2018, we find that firm‐level climate change exposure is significantly and positively related to the likelihood of ICP adoption. More specifically, the probability of adoption is largely linked to regulatory shocks and opportunity exposure. Moreover, we find that board independence acts as a moderator in the climate change exposure–ICP adoption relation. The findings of this study shed light on the factors contributing to the acceleration in ICP implementation in the context of a coordinated effort between public and private sectors to reduce global emissions.

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Climate risks and the practice of corporate valuation

Cited by 8 publications

References 0 publications

Determinants of internal carbon pricing

Determinants of internal carbon pricing

Turning Gold Into Green: Green Finance In The Mandate Of European Financial Supervision

Climate change exposure and internal carbon pricing adoption

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