What is financial sustainability and why is it important in a business context? Flashcards
temperature rise limit
goal is to limit to 1.5 degrees
if temp rise not controlled?
could rise by 4 degrees and no species could survive at this level
goals for carbon emissions
need net-zero emissions so drastic reduction required
financial opportunities
climate change mitigation creates market opportunities, winner and losers in secondary markets
UNFCCC
1992: United Nations framework convention on climate change - set non binding limits on GHG emissions
Kyoto Protocol
signed in 1997, ratified in 2005 Russia being the 55th country, goal is to reduce GHG emissions by 5% from 1990 levels
Paris Agreement
the largest climate agreement, its goal is to keep temperature rise below 2 and aim for 1.5. net-zero emissions by the second half of the century. introduced by the Intended Nationally Determined Contributions (INDCs)
each country has their own emissions target
key research areas in climate finance
asset pricing - investors pricing carbon risk
corporate finance - funding the transition to low-carbon solutions
investments - performance of green funds, bonds and equities
link to ESG
physical risks of climate change
flooding, drought, rising sea levels, impact on physical assets, agriculture and workers. this leads to lower asset valuation and productivity
transition risks
policy changes, technology advancements, and shifts in consumer preferences this effects firms in transitioning sectors
liability risks
insurance claims and legal actions this impacts demand and profits
uncertainty and litigation risks
conflicting transition forecasts increase uncertainty, litigation risks include lawsuits against governments, companies and lobby groups
securities laws
legal framework for addressing climate-related risks in financial markets
