14. Guest lecture - Carbon and physical risk indicators in finance

Question 1

Name 2 of the main tasks of the Dutch Central Bank

Answer 1

1. Supervision of financial institutions
2. Guarding financial stability
3. Ensure smoothly functioning payment system
4. Economic advice to the government
5. Resolution
6. Producing monetary and financial statistics

Question 2

Why is sustainability important for the financial sector?

Answer 2

Because the climate crisis leads to risks for the financial system.

Question 3

Name two of the four main indicators that the DCB produces.

Answer 3

1. Financed emissions
2. Carbon intensity
3. Carbon footprint
4. Weighted average carbon intensity

Question 4

What are the four analytical layers for physical risk analysis?

Answer 4

1. Geolocation
2. Hazards
3. Exposure
4. Vulnerability

Question 5

What is geolocation?

Answer 5

Where is a company located?

Question 6

Name an example of a hazard.

Answer 6

• Coastal floods
• River floods
• Earthquakes
• Windstorms
• Landslides
• Heat stress

Question 7

What are damage functions?

Answer 7

DMFs link the exposure to a hazard with its possible damage, incorporating adaptation measures and providing an estimate of potential monetary loss.

Question 8

What does exposure mean?

Answer 8

Who is at risk?

Question 9

Why does the Netherland have the highest Normalized Exposure at Risk?

Answer 9

Because protecting measures are not taken into account.

Question 10

What is the NGFS?

Answer 10

The Network of Central Bank and Supervisors for Greening the Financial System. It is a coalition that issues recommendations.