TARGET GROUP | Mid-level to senior public officials from central banks, ministries of finance or economics, financial supervisory authorities and regulators.
DESCRIPTION | Climate change poses significant long-term risks to financial assets, to the financial institutions which hold those assets and to financial stability at large. Taking that into account will change the relative prices of assets which are exposed to climate-related risks and assets which are not. Supervisors, regulators and asset managers must account for these risks or else their expectations on risk-adjusted returns will be systematically biased. If market participants do not anticipate the effects of climate change, financial stability may be endangered. The transition towards a climate-neutral economy requires more investments in carbon-neutral technologies, and thus also creates opportunities for the financial sector. Policymakers like the EU and national governments need to increase public investments and to create more incentives for private funding of safe and sustainable climate-friendly technologies.
The course will cover the channels through which climate change affects the economy and financial markets, different climate change scenarios and especially the impact of climate change on the financial system. It will present methods for identification and assessment of climate risks to banks and other financial institutions (e.g. stress testing exercises) and discuss macroprudential instruments to tackle those (and other ESG) risks. It will also present ways for financing the transition towards a climate-neutral economy and discuss recent policy proposals to that end.