Sunday , May 26 2019
Home / Dirk Niepelt / Climate Risk, Credit Risk, and ECB Collateral

Climate Risk, Credit Risk, and ECB Collateral

Summary:
In a CEP Discussion Note, Pierre Monnin argues that financial markets mis-price climate related credit risk. If this were corrected some securities held by the ECB would loose their investment grade credit rating. Assessing climate risks requires methodologies based on forward-looking scenarios, on complex cause-and-effect linkages and on data that has not been observed in the past. Such models are at their infancy, but already offer meaningful insights. This note provides an overview of key components that such models are built on and illustrates them with examples of the analytics that are already available. It also applies one of the available methodologies to assess transition risk to the corporate bond holdings of the European Central Bank.

Topics:
Dirk Niepelt considers the following as important: , , , , ,

This could be interesting, too:

Dirk Niepelt writes Hospital Care in Switzerland and Germany

Dirk Niepelt writes Hospital Care in Switzerland and Germany

Dirk Niepelt writes Climate Risk, Credit Risk, and ECB Collateral

Jeffrey P. Snider writes COT Blue: Distinct Lack of Green But A Lot That’s Gold

In a CEP Discussion Note, Pierre Monnin argues that financial markets mis-price climate related credit risk. If this were corrected some securities held by the ECB would loose their investment grade credit rating.

Assessing climate risks requires methodologies based on forward-looking scenarios, on complex cause-and-effect linkages and on data that has not been observed in the past. Such models are at their infancy, but already offer meaningful insights. This note provides an overview of key components that such models are built on and illustrates them with examples of the analytics that are already available. It also applies one of the available methodologies to assess transition risk to the corporate bond holdings of the European Central Bank.

Dirk Niepelt
Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

Leave a Reply

Your email address will not be published. Required fields are marked *