Climate-related Risks Research Articles

Climate risk and the idiosyncratic volatility puzzle

ABSTRACT Our study offers intriguing evidence on the much-debated idiosyncratic volatility (IdVol) puzzle from a climate risk perspective. Using a set of US-listed stocks from July 2010 to December 2019, our robust portfolio- and stock-level results reveal that the IdVol puzzle exists in both carbon-footprint-disclosing and non-disclosing stocks. Furthermore, investors do not perceive a significant difference in the IdVol puzzle between carbon-footprint-disclosing and non-disclosing stocks. However, the IdVol puzzle is concentrated in high-carbon-intensive stocks as far as those carbon-footprint-disclosing stocks are concerned, implying the combined effect of investor attention and ethical screening of stocks. Overall, our results substantiate the specific impact of climate-related risks on asset pricing decisions.

No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks

ABSTRACT Climate change poses several risks to the value of financial assets and financial stability. The study conducted in this paper focuses on the German banking sector and estimates its exposure to climate risks arising from a transition to a carbon-neutral economy. Our analysis identifies the energy, transportation, and manufacturing sectors as the most sensitive to transition risks. It shows that the German banking sector's direct exposure to climate transition risks is non-negligible. Moreover, it indicates that an amplified exposure to transition risks characterizes large private banks. These findings are comparable to other countries exposures and relevant to financial supervision and regulation, calling for increased engagement to assess, measure, and manage climate-related financial risks.

Financial development and environmental quality nexus: Testing the double materiality hypothesis

ABSTRACT A novel paradigmatic concept has recently been introduced in the financial development-environmental quality nexus, referred to as the double materiality concept. This concept proposes that not only is financial development significant for the environment, but the environment also has a significant impact on financial development. We examine this financial development-environmental quality nexus by proposing and empirically testing the double materiality hypothesis. The cross-sectional Autoregressive Distributed Lag estimations and the Dumitrescu-Hurlin causality test are applied in the top-ten CO2 emitting countries over the period 1990–2018. We empirically confirm the validity of the double materiality hypothesis in these countries. Specifically, the cross-sectional Autoregressive Distributed Lag estimation results show that financial development exhibits a positive impact on the level of CO2 whilst the level of CO2 emissions hinders financial development in the top-ten CO2 emitters. Similarly, the causality test results show that there is a bidirectional association between the financial development and the level of CO2 emissions. Thus, regulatory authorities should take proactive approaches by assessing the externalities of climate-related risks and the potential channels that may trigger systemic risks.

Greening Finance? What Institutional Options for a Sustainable Transition?

Research on sustainability and energy transition aims to identify the structural changes that should occur and how they could be achieved and managed to render society more viable. Institutions are the providers of an appropriate environment that should offer those conditions and allow citizens to undertake activities that meet both individual and societal goals. Climate emergency and transition constraints recast economic and political structures and put institutions under pressure in the face of global risks. Two of them, climate risks and financial risks, can be regarded as sources of systemic risk since they determine the conditions of viability of our economies and societies. This article argues that an appropriate institutional reform is required to frame macroprudential policies for financial regulation and tackle climate change by greening finance and containing climate-related financial risks. The article then assesses the scope of a macro-regulatory institutional framework to provide relevant support for sustainable finance and financial markets to improve our ability to secure a viable future for our societies. Long-term sustainable financial tools for financing the transition require definancialization of the economy to prevent the perversion of financial practices that undermine societal sustainability and sabotage financing resources that a greener future inevitably needs.

Serologic Survey of Selected Arthropod-Borne Pathogens in Free-Ranging Snowshoe Hares (Lepus americanus) Captured in Northern Michigan, USA.

Snowshoe hares (Lepus americanus) in the Upper Peninsula (UP) of Michigan, USA, occupy the southern periphery of the species' range and are vulnerable to climate change. In the eastern UP, hares are isolated by the Great Lakes, potentially exacerbating exposure to climate-change-induced habitat alterations. Climate change is also measurably affecting distribution and prevalence of vector-borne pathogens in North America, and increases in disease occurrence and prevalence can be one signal of climate-stressed wildlife populations. We conducted a serosurvey for vector-borne pathogens in snowshoe hares that were captured in the Hiawatha National Forest in the eastern UP of Michigan, USA, 2016-2017. The most commonly detected antibody response was to the mosquito-borne California serogroup snowshoe hare virus (SSHV). Overall, 24 (51%) hares screened positive for SSHV antibodies and of these, 23 (96%) were confirmed positive by plaque reduction neutralization test. We found a positive association between seroprevalence of SSHV and live weight of snowshoe hares. Additionally, we detected a significant effect of ecological land type group on seroprevalence of SSHV, with strong positive support for a group representing areas that tend to support high numbers of hares (i.e., acidic mineral containing soils with cedar, mixed swamp conifers, tamarack and balsam fir as common overstory vegetation). We also detected and confirmed antibodies for Jamestown Canyon virus and Silverwater virus in a single hare each. We did not detect antibodies to other zoonotic vector-borne pathogens, including Lacrosse encephalitis virus, West Nile virus, Borrelia burgdorferi, Powassan virus, and Francisella tularensis. These results provide a baseline for future serological studies of vector-transmitted diseases that may increase climate vulnerability of snowshoe hares in the UP of Michigan, as well as pose a climate-related zoonotic risk.

Khuôn khổ giám sát rủi ro tài chính liên quan đến biến đổi khí hậu của Ngân hàng Nhà nước Việt Nam

Climate change is happening rapidly and poses a significant risk to the global economy. International organizations have issued many regulations to manage and supervise climate-related financial risk (CRFR) to ensure the financial system’s safety. This paper uses the content analysis method to evaluate the CRFR monitoring framework of the State Bank of Vietnam compared with the Basel Committee on Banking Supervision. The results show that the CRFR supervision framework in Vietnam is still under development; the regulations and guidelines are not specific and not yet in line with the international framework, such as not clearly defining the responsibilities of senior management in CRFR monitoring, not providing guidance on the implementation, evaluation, and monitoring of the results of scenario analysis and stress testing on the resilience of banks to climate change, not clearly announcing the monitoring objectives and improving the quality of supervisors, and not requiring financial institutions to disclose information related to CRFR.

Assessment of plausible changes in Climatic Impact-Drivers relevant for the viticulture sector: A storyline approach with a climate service perspective

Under the pressing warming of climate, interpretable and useful-for-adaptation information has become a need in society and has promoted rapid methodological advances in climate science. One such advance is the development of the dynamical-storyline approach, with which the spread in multi-model scenario projections can be represented as a set of physically plausible scenarios (storylines) defined by (a) a global warming level and (b) changes in large-scale dynamical conditions that arise from climate forcing. Moreover, if changes in regional climate are assessed in such a way that they can clearly inform societal systems or management of natural ecosystems, they can potentially aid decision-making in a practical manner. Such is the aim of the climatic impact-driver (CID) framework, proposed in the Sixth Assessment Report (AR6) from the Intergovernmental Panel on Climate Change. Here, we combine the dynamical-storyline approach with the CID framework and apply them to climate services. We focus on CIDs associated with the viticulture sector and the region of the South American Andes, where currently both Argentina and Chile produce wine. We explain the benefits of this approach from a communication and adaptation perspective. In particular, we found that the CIDs related to seasonally aggregated temperatures are mainly dependent on the global warming level although in some regions, but they can also be sensitive to changes in dynamical conditions. Meanwhile, CIDs related to extreme temperature values and precipitation depend strongly on the dynamical response. We show how adaptation to climate-related compound risks can be informed by a storyline approach, given that they can address compound uncertainty in multiple locations, variables and seasons.

A Conceptual Study on Implications of Green Finance in India

Abstract: The financial industry can help reduce the risk of climate change and lessen the effects of unfavourable climate occurrences, which is a significant contribution to the battle against climate change. Maintaining financial stability and spreading climate-related risks can be aided by long-term institutional investors. Other financial tools, such as green stock indexes, green bonds, and voluntary de-carbonization programmes, can assist reallocate investment to "green" industries. Hedging products, such as catastrophe bonds and indexed insurance, help insure against increasing natural disaster risk. For the foreseeable future, climate change is expected to remain the central political and economic issue of this century. Globally, governments, corporations, investors, and private citizens are starting to act on climate change, particularly with regard to decarbonisation strategies. It would take exceptional amounts of new capital investment—green financing, in particular—to support the kinds of initiatives that reduce greenhouse gas emissions and help businesses adjust to the effects of climate change in order to transition to a low-carbon or green economy. For this reason, it's critical to comprehend what green finance is and why it matters. In order to handle the complex risks that climate change poses, central banks and other regulators are modifying their frameworks and procedures from an oversight standpoint. Among the strategies for enhancing climate risk disclosure and categorization requirements are those that will assist investors and financial institutions in evaluating their exposure to climate risk, as well as regulators in assessing systemic hazards. Supporting the development of climate-related stress tests and broader promotion of green finance, the IMF is collaborating with standard-setting organisations such as the Network of Central Banks and Supervisors for Greening the Financial System. The researcher concludes that it is important to pursue this investigation in light of the aforementioned facts

Exploring Climate Migration and Environmental Security: Türkiye to America and Beyond

Since all three books were published in 2023, they are foremost among the works that will be useful for those interested in this topic, as they are up-to-date and address current issues on the relationship between climate change, forced migration, and environmental security. Many studies conducted around the world reveal that the effects of climate change will become much more visible both in the world and in Türkiye, especially in the next decade, and that the lives of millions of people will be directly negatively affected. For this reason, it is important to conduct qualitative and quantitative studies on what awaits Türkiye in terms of climate-related risks, especially in terms of migration.

Assessment of Climate Change Risk on Insurance Portfolios

Purpose: The general purpose of this study was to investigate the assessment of climate change risk on insurance portfolios.
 Methodology: The study adopted a desktop research methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library.
 Findings: The findings reveal that there exists a contextual and methodological gap relating to climate change risk on insurance portfolios. The assessment of climate change risk on insurance portfolios reveals the significant challenges posed by increasingly frequent and severe climate-related events, impacting insurers' financial stability and policyholders' security. Key conclusions emphasize the imperative for insurers to enhance climate risk modeling, integrate climate considerations into decision-making processes, and foster collaboration with stakeholders to develop effective risk management solutions. Proactive measures are essential to address the systemic nature of climate risks, underscoring the urgency of collective action and innovation to build resilience and sustainability in insurance portfolios and broader society amidst a changing climate.
 Unique Contribution to Theory, Practice and Policy: The Prospect theory, Agency theory and the Resilience theory may be used to anchor future studies relating to climate change risk on insurance portfolios. Insurers are advised to invest in advanced risk modeling, diversify risk exposure across regions and lines of business, integrate climate risk into underwriting and pricing, strengthen regulatory oversight, collaborate with stakeholders, and invest in climate adaptation and mitigation measures. These recommendations aim to improve insurers' ability to quantify and manage climate-related risks effectively, promote sustainability, and contribute to broader resilience-building efforts in the face of climate change.
 Keywords: Climate Change Risk, Insurance Portfolios, Resilience, Risk Modeling, Diversification, Underwriting, Regulatory Oversight, Collaboration

Dairy Farmers’ Perceptions and Adaptation Strategies Towards The Effects of Climate Change in Southern Marmara Region of Turkey

Aims: The study aims to determine dairy farmers' perceptions of climate-related risks, their adaptation strategies and factors affecting their decisions about adaptation strategies in Southern Marmara Region of Turkey. Material and methods: Data was collected from 379 dairy farmers by proportional sampling method. The survey was performed between October and December 2023. Descriptive statistics and probit model were used in the evaluation of the data. Results: Most dairy farmers (70.7%) had a high perception for heavy storms. Changing feed ration seasonally was the most widespread adaptation strategy employed by dairy farmers. It was followed by diversification of animal production activities, livestock insurance and diverseness of feed crops. Among these adaptation strategies, changing feed ration seasonally was the highest choosen adaptation strategy in the study area whereas the diverseness of feed crops was the least choosen adaptation strategy. The probit model results showed that the dairy farmers' age and household size had an adverse the impact on their decisions about all adaptation strategies. Discussion: These results of this study stated that most dairy farmers perceived the rise in temperatures and decline in rainfall as noticeable changes in climate. Few dairy farmers used advanced agricultural applications for dealing with the negative impacts of climatic change, and many dairy farmers continued use to simple adaptation measures. Conclusions:As a result, the present study findings can shed light to policy/decision makers in agricultural research, to practices regarding the climate change impact in dairy farming, and to further studies in the literature.

Climate transition risk and the role of bank capital requirements

How should bank capital requirements be set to deal with climate-related transition risks? We build a general equilibrium macro banking model where production requires fossil and low-carbon energy intermediate inputs, and the banking sector is subject to volatility risk linked to changes in energy prices. Introducing carbon taxes to reduce carbon emissions in fossil energy induces risk spillovers into the banking sector. Sectoral capital requirements can effectively address risks from energy-related exposures, benefiting household welfare and indirectly facilitating capital reallocation. Absent carbon taxes, implementing fossil penalizing capital requirements does not reduce emissions significantly and may threaten financial stability. During the transition, capital requirements can complement carbon tax policies, safeguarding financial stability and trading off long-run welfare gains at the expense of lower investment and credit supply in the short run.

Governing Urban Climate Resilience (UCR): Systems, Agents, and Institutions in Shanghai, China

Climate change and urbanization intersect with escalating danger. Urban areas significantly contribute to climate change, which, in turn, poses severe threats to urban settings. The frequency and intensity of extreme events, like flooding and heat, are rising, with the need to enhance urban climate resilience (UCR) becoming more immediate. Scholarship tends to underrepresent general climate resilience in favor of specific hazards. This research seeks to contribute to the literature by exploring the case of Shanghai, China, discovering the mechanisms and characteristics of UCR governance, and examining how these outcomes are formed from a comparative gesture. The findings indicate that in Shanghai, 36.8% and 26.8% of climate resilience governance strategies are reflected in regional management and infrastructure construction led by the Water Affairs Bureau and the Meteorological Bureau. Furthermore, 30.6% of the strategies relate to the Water Affairs Bureau, showcasing a robust and integrated flood response. Meanwhile, 15.7% involve the Meteorological Bureau, boosting responses to high temperatures with better monitoring and early warning for increased flexibility and efficiency. Distinct governance processes for floods and extreme heat mirror these hazards’ inherent characteristics and societal perceptions. With strong government willingness and support, Shanghai has rapidly enhanced its flood resilience capabilities within a brief timeframe. Conversely, addressing the emerging risk of extreme heat is still in the early stages of evaluation, due to the lack of a clear disaster-bearing system and identified responsible agents. This research suggests that the future of climate resilience governance in Shanghai may emphasize identifying the characteristics of critical climate-related risks, expanding social autonomy through grassroots self-governance, procuring economic backing from the central government, and applying the tool of urban spatial planning.

Is the insular coastal tourism of western Greece at risk due to climate induced sea level rise?

Coastal environments and, especially, beach zones are among the most common areas for tourism activity, comprising valuable economic resources. Beach zones are highly dynamic environments, recognized as highly vulnerable to climate change coastal ecosystems because of, amongst other, extreme events and sea-level rise. It is considerably important for beach tourism management the development of proper adaptation strategies. The scope of this study is to provide an assessment of the potential climate-related risk on touristic beaches of the Ionian Islands (Greece) by applying a three-step risk assessment methodology, following the impact chain conceptual framework. More specifically, the methodology integrates: (i) beach hazard as an expression of beach retreat calculation due to sea level rise to the extreme SSP5-8.5 scenario for 2050, (ii) beach exposure with regard to tourism economic losses according to the extent of beach touristic exploitation, and (iii) beach vulnerability with regard to both beach capacity considering its morphological characteristics and sensitivity considering the adverse impact of artificial structures and human development in the area. The results indicate a great heterogeneity in risk, with more than half beaches being at high or very high risk under the highest emissions scenario.

Decoupling climate change: winter tourism and the maintenance of regional growth

ABSTRACT Climate change poses a severe risk for economic growth. The negative effects of climate change are, however, variegated depending on the region and the type of dominant industries fuelling their economies. Winter tourism in the Alps presents a case of a regionally specific and climate-vulnerable growth driver. Despite increasing climate-related physical risks to winter tourism such as snow scarcity, investments into infrastructure expansion continue. This raises the question of why a potentially unviable growth strategy is actively maintained considering the inevitable climate change scenario. Through semi-structured interviews, field work and archival research, this paper explores how the winter-touristic growth coalition responds to climate change. The findings show that key actors discursively decouple climate change from their growth strategies, which allows them to maintain the winter-touristic growth driver. ‘There is no alternative’ narratives and sustainability frameworks characterise the growth coalition´s response to the challenge of climate change. This paper makes an important contribution by exploring winter tourism as regional growth driver that contributes to a national export-oriented growth model. It thereby provides a unique perspective on regional underpinnings of growth models and the politics perpetuating growth model stasis under vulnerable climate conditions.

Understanding the interplay of occupational, public health, and climate-related risks for informal workers: A new framework with findings from Zimbabwe and India

Globally, there are 2 billion ‘informal’ workers, who lack access to social protection while facing profound health risks and socioeconomic exclusions. The informal economy has generated most jobs in Low and Middle-Income Countries (LMICs), but few studies have explored informal workers' complex health vulnerabilities, including in the face of climate change.This paper will discuss recent action-research in Indore (India), Harare, and Masvingo (Zimbabwe) with informal workers like vendors, waste-pickers, and urban farmers. We conducted qualitative interviews (N = 110 in India), focus group discussions (N = 207 in Zimbabwe), and a quantitative survey (N = 418 in Zimbabwe). Many informal workers live in informal settlements (‘slums’), and we highlight the interrelated health risks at their homes and workplaces. We explore how climate-related threats—including heatwaves, drought, and floods—negatively affect informal workers' health and livelihoods. These challenges often have gender-inequitable impacts. We also analyse workers' individual and collective responses.We propose a comprehensive framework to reveal the drivers of health in the informal economy, and we complement this holistic approach with a new research agenda. Our framework highlights the socioeconomic, environmental, and political determinants of informal workers' health. We argue that informal workers may face difficult trade-offs, due to competing priorities in the face of climate change and other risks. Future interventions will need to recognise informal workers’ array of risks and co-develop multifaceted solutions, thereby helping to avoid such impossible choices. We recommend holistic initiatives to foster health and climate resilience, as well as participatory action-research partnerships and qualitative, intersectional data-collection with informal workers.

CLIMATE CHANGE AND FOOD SUPPLY CHAIN ECONOMICS: A COMPREHENSIVE ANALYSIS OF IMPACTS, ADAPTATIONS, AND SUSTAINABILITY

Climate change poses significant challenges to global food supply chains, impacting various facets of production, distribution, and consumption. This review presents a comprehensive analysis of the intricate relationship between climate change and food supply chain economics, focusing on its impacts, adaptations, and sustainability measures. Firstly, climate change disrupts agricultural production through extreme weather events, shifts in precipitation patterns, and changes in temperature, leading to reduced crop yields and quality. These impacts ripple through the entire food supply chain, affecting input costs, market prices, and food security. Consequently, stakeholders across the supply chain face heightened risks and uncertainties, necessitating adaptive strategies to mitigate losses and maintain resilience. Secondly, adaptation measures within food supply chains encompass a range of strategies aimed at minimizing climate-related risks and optimizing resource utilization. These may include adopting climate-resilient crop varieties, implementing precision agriculture techniques, enhancing water management practices, and diversifying sourcing and distribution channels. Moreover, investments in technology, infrastructure, and knowledge transfer play pivotal roles in enhancing adaptive capacities and fostering sustainability in the face of climate variability. Furthermore, ensuring the sustainability of food supply chains amidst climate change requires a multifaceted approach that integrates economic, social, and environmental considerations. Sustainable practices such as organic farming, agroforestry, and regenerative agriculture not only mitigate greenhouse gas emissions but also enhance ecosystem resilience and promote equitable access to resources. Moreover, fostering collaboration and knowledge exchange among stakeholders, including farmers, policymakers, researchers, and consumers, is essential for promoting innovation and driving transformative change towards more resilient and sustainable food systems. In conclusion, understanding the complex interplay between climate change and food supply chain economics is essential for developing effective strategies to mitigate risks, enhance adaptation, and promote sustainability. By adopting a holistic approach that integrates scientific insights, technological innovations, and stakeholder engagement, the global community can work towards building more resilient and equitable food supply chains in a changing climate.
 Keywords: Climate Change, Food, Supply, Chain, Economics, Review.

Historical trends and future projections of annual rainfall from CMIP6 models in Ho Chi Minh City, Vietnam

Climate risks have posed a major threat to many local communities living in low-lying coastal megacities across the globe, including Ho Chi Minh City, Vietnam. Hence, this study first aimed to contribute towards a comprehensive understanding of temporal trend patterns of annual rainfall and absolute extremes in Ho Chi Minh City over the last 4 decades (1980-2022) through multiple non-parametric statistical trend tests. We employed the quantile delta mapping (QDM) method to develop daily bias-corrected rainfall data based on the outputs in the latest Coupled Model Intercomparison Project phase 6 (CMIP6) under 8 shared socio-economic pathway (SSP) greenhouse gas emission scenarios. Evaluation of model performance was implemented by repeatedly omitting 5 successive years in turn for estimating testing errors. The outcomes indicate the high applicability of well-calibrated transfer functions, even for high quantiles, to the production of future rainfall scenarios. The projected changes in annual rainfall and absolute extremes were obtained by estimating multi-model medians from CMIP6 models for future periods (i.e. 2021-2040, 2041-2060, 2061-2080, and 2081-2100), with reference to the base period (1995-2014). In general, annual rainfall in Ho Chi Minh City is projected to increase substantially, and Thu Duc station consistently shows the highest increases in annual rainfall. Projected changes are approximately 30.9% (8.3 to 77.8%) under the high-end scenario (i.e. SSP5-8.5) by the end of the 21st century. It is expected that these findings will yield several solid arguments for mitigating climate-related risks in Ho Chi Minh City.

Twenty-year tango: Exploring the reciprocal influence of macro-financial instability and climate risks

This study presents a novel investigation of the reciprocal relationship between financial instability and climate risks, focusing on the influence of climate policy uncertainty within the US financial system from a macroeconomic perspective. By adopting the bootstrap rolling-window causality method, the analysis captures structural changes over an extended period between January 2000 and March 2021. Importantly, this method provides a robust data-driven approach, avoiding ad hoc assumptions about temporal breakpoints. The results support the climate fragility hypothesis, highlighting the amplifying effect of financial instability on climate risks. The study reveals that periods of economic and political turbulence exacerbate these effects by generating substantial financial turbulence, which, in turn, influences climate policy. The results also indicate that climate policy uncertainty contributes to worsening financial instability during critical events such as sudden changes in interest rates and major financial crises. The implications of this research extend to policymakers and investors, encouraging them to integrate climate factors into decision-making processes and adopt sustainable practices to promote financial stability and mitigate climate-related risks.

Escalating climate-related health risks for Hajj pilgrims to Mecca.

Global temperatures are on the rise, leading to more frequent and severe heatwaves with associated health risks. Heat-related illnesses (HRIs) are an increasing threat for travellers to hot climate destinations. This study was designed to elucidate the interplay between increasing ambient temperatures, incidence of HRIs and the effectiveness of mitigation strategies during the annual Hajj mass gathering over a 40-year period. An observational study was conducted utilizing historical records spanning four decades of meteorological data, and the rates of heat stroke (HS) and heat exhaustion (HE) during the Hajj pilgrimage in Mecca, Saudi Arabia. With an annual population exceeding 2million participants from over 180 countries, the study analysed temporal variations in weather conditions over two distinct Hajj hot cycles and correlated it with the occurrence of HS and HE. The effectiveness of deployed mitigation measures in alleviating health vulnerabilities between the two cycles was also assessed. Throughout the study period, average dry and wet bulb temperatures in Mecca escalated by 0.4°C (Mann-Kendall P < 0.0001) and 0.2°C (Mann-Kendall P = 0.25) per decade, respectively. Both temperatures were strongly correlated with the incidence of HS and HE (P < 0.001). Despite the intensifying heat, the mitigation strategies including individual, structural and community measures were associated with a substantial 74.6% reduction in HS cases and a 47.6% decrease in case fatality rate. The study underscores the escalating climate-related health risks in Mecca over the study period. The mitigation measures' efficacy in such a globally representative setting emphasizes the findings' generalizability and the importance of refining public health interventions in the face of rising temperatures.