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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Featured Pathways

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Book a demo

Pricing

Ready to get started?

Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

Book a demo

Pricing

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Book a demo

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Constructing Climate Hedge Portfolios

Constructing Climate Hedge Portfolios

Robert Engle

Nobel Prize winning economist

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.

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.

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Constructing Climate Hedge Portfolios

11 mins 11 secs

Key learning objectives:

  • Learn how to construct climate hedge portfolios

  • Define the characteristics of a stranded asset portfolio and a factor mimicking portfolio

  • Understand why fossil fuel energy stocks are rising

  • Define why it’s difficult to hedge physical risks

Overview:

Robert Engle shows us numerous strategies for constructing a climate hedge portfolio and their respective benefits. Robert then explores why it’s hard to hedge physical risks, the part of climate change most people worry about, and why the demand for oil and coal is going up.

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Summary

What is a stranded asset portfolio?

This means going long on the S&P 500 and short 70% of the returns on a coal ETF and 30% of the returns on energy. This is all on energy stocks so it will presumably do well when energy stock prices are going down, and badly when they're going up. 

What is a factor mimicking portfolio?

This means forming dynamic long-only portfolios of publicly available funds, minimising the variance of the portfolio and maximising the correlation of this portfolio with a news series. Then hold it for a month and then recalculate.

Why is it difficult to hedge physical risks?

Climate physical risks, such as temperature change, drought, storms and wildfires is difficult to hedge because physical risks have to be geo-coded and stocks aren't particularly localised - although they have localised supply chains, plants or business models which are exposed to climate change. 

Using two hurricanes in 2017 as an example, Hurricane Harvey had its biggest impact in retail, refining, insurance, air transit and banking. Hurricane Irma had its biggest impact on nursing care, electric utilities, air transport, insurance and tourism. So two separate hurricanes hitting similar locations in the US had completely different impacts across industries. 

Why are fossil fuel energy stocks rising?

The demand for oil and coal is going up. One explanation for this is if the transition is done through regulation, it reduces the quantity of emissions but leads to higher and higher prices of energy stocks, akin to a carbon tax. 

 

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Robert Engle

Robert Engle

Robert Engle is a co-director of the Volatility and Risk Institute. He was awarded the 2003 Nobel Prize in Economic Sciences for his work on autoregressive conditional heteroskedasticity. He holds a Ph.D. in economics from Cornell University in New York, United States.

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