Climate change creates physical, transition and liability risk. Climate risk helps to quantify the potential and realised impacts of climate change for private sector, especially banks. However, considering the complexity of global climate change, can any risk parameter truy encapsulate it?
The diversity of investors in renewable energy has increased, opening up the pre-existing range of investment opportunities in renewables to greater scrutiny of risk and return. Renewable energy is not an asset class in itself but is a sub-category within several asset classes. Key risks which may need to be computed into the APT model are: price interaction with fossil fuel technologies, complexity of storing renewable-derived commodities, unknown future risks of renewable technologies, the capital-intensive nature of renewable “real estate”, the differing levels of commercial readiness of renewable technologies, regulatory volatility in the jurisdictions in which renewable energy projects are based.
A rise in temperature will lead to a decrease in labor productivity (more dehydration, chronic health diseases and even death) which will further leading to a decline in economic activity. A critical factor to curtail losses in work capacity will be the extent of application of preventive strategies (such as cooling technologies, hydration, and work rotation) in outdoor and indoor work environment. Policy reforms should include long-term and short-term measures to mitigate the impact of heat on workers’ productivity. Long-term measures like reducing greenhouse emissions and short-term measures like providing clean drinking water at the workplace, good air conditioning, shade cover, and utilizing green architects to capture natural air and light.
TCFD stands for Task Force on Climate-Related Financial Disclosures. The TCFD’s overall aim is to encourage a greener and thus more stable international financial system. The TCFD disclosures allow investors and financial institutions to make more informed and clearer price risk related decisions. Making climate disclosures mandatory in alignment with TCFD’s framework encourages a greater international effort to move towards a greener economy.
Universal Basic Income (UBI) has shifted from a radical agenda to a relevant policy proposal, especially since the pandemic · UBI could have positive environmental impacts, such as reducing status-based consumption and facilitating more sustainable food practices · UBI must be introduced in a way that complements other policy shifts towards environmental protection and social justice
Ecological economics focuses on the need for human economic activity to not extend beyond our ecological ceiling whilst providing prosperity for all. It differs from neoclassical (more traditional) forms of economics in that there is not an emphasis on growth but rather ensuring planetary and societal welfare through redistributive and regenerative systems. Some current day examples of economic frameworks that use ecological economics are degrowth (Hickel & Kallis) and Doughnut Economics (Kate Raworth).
Doughnut Economics is an ecologically safe and socially just economic model developed by the economist Kate Raworth in 2012. The Doughnut diagram consists of two concentric rings: a social foundation and an ecological ceiling. There are seven main principles to implement Doughnut Economics.
Understanding the “S” component in ESG has posed challenges which are important to overcome. Using and integrating existing and upcoming technologies into supply chain analysis is a key recommendation for improving analysis of Social issues in ESG Rating agencies will play an important role in verifying Social impacts which are financially material, amplifying the existence of double materiality in reporting social and environmental issues
If the ownership of negative externalities is assigned, parties can negotiate to reach the best deal. Negotiation is often more efficient than relying on the justice system due to costs and time constraints. Coase Theorem is hardly applied in reality, as one party will often be stronger than the other.
In the past few years, there has been a strong increase in ESG reporting requirements around the world. ESG stands for Environmental, Social, and Governance. They are a set of standards for a company's operations that have become a popular way to indicate a firm’s sustainability performance. There are various issues reported by companies under each of the three pillars, comprising a variety of metrics. The environmental criterion considers how companies manage their environmental impact and use resources. Some of the factors include greenhouse gas emissions, water use, land-use, biodiversity, pollution management, and climate change adaptation. Social criteria focus on how the company fosters its people and engages with the wider society. Examples of social criteria include workforce diversity and inclusion, community engagement, customer satisfaction, and human rights. Governance considers the company’s internal system of practices and policies. Factors include business ethics and code of conduct, risk governance, supply chain management, and tax strategy.