Portfolio Climate Risk Management and Climate Stress Tests

Banks are increasingly having to prepare for the risks that climate change will bring. For central banks in particular, stress tests have become integral to predicting what the future holds for their assets. Modelling climate risks allows banks to drive understanding of current and future risk from extreme events. In this pathway, Tony Hughes will discuss the macroeconomic and microeconomic risk to bank safety from climate-related risk. Professor Robert Engles Ph.D. discusses how we can construct a climate hedge portfolio and use this portfolio to stress test banks.In this pathway, Tony Hughes will discuss the macroeconomic and microeconomic risk to bank safety from climate-related risk. Professor Robert Engles Ph.D. discusses how we can construct a climate hedge portfolio and use this portfolio to stress test banks.

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6 video modules • 1 hour

  • Introduction to Portfolio Climate Risk Mitigation

    In this video collaboration with MMF, Nobel Laureate and economist Robert Engle introduces climate financial risks - from the biggest financial shocks we have seen historically to how we measure different risk factors when they arise simultaneously. Robert explores how we can prepare for these different scenarios using four different investor goals, all accounting for climate change.

    Robert Engle13:01

  • Asset Pricing Theory of Climate Hedge Portfolios

    In this video collaboration with MMF, Nobel Laureate and economist Robert Engle explores the asset pricing theory behind hedge portfolios, as well as how you would build a portfolio using either fundamental or statistical analysis.

    Robert Engle06:14

  • Constructing Climate Hedge Portfolios

    In this video collaboration with MMF, Nobel Laureate and economist Robert Engle outlines how to construct a climate hedge portfolio using two strategies and explores why it's not that easy to hedge physical risks.

    Robert Engle11:11

  • Climate Stress Scenarios and Stress Tests

    In this final video collaboration with MMF, Nobel Laureate and economist Robert Engle discusses using climate portfolios to stress test banks and prepare for future damage.

    Robert Engle11:26

  • Macro Learnings about Climate-related Credit Losses

    In this video collaboration with MMF and Grant Thornton, risk modeller and data scientist Tony Hughes outlines the impact of climate change on the financial system. More specifically, why climate change has had a limited impact on the financial system so far.

    Tony Hughes09:10

  • Micro Level Evaluation of Climate-related Credit Losses

    In this video collaboration between the MMF, Grant Thornton, Finance and Sustainability Unlocked, Tony Hughes, expert risk modeller and data scientist outlines the link impact of climate change on the financial system. In the second video in his two-part series, Tony outlines why financial costs have been muted so far, pointing to the predictability of climate impact, which leads to closer preparedness from firms and investors.

    Tony Hughes09:39

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