Climate risk modeller
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.
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.
9 mins 39 secs
Climate change has, so far, had a limited impact on the financial system. At a micro level, using natural experiments, analysis shows that the relationships between climate risks and credit risks are mixed. In some instances where people have been impacted by a climate event, they have ended up better off in the long run, whereas in some cases they haven't.
It is suspected that financial costs have been muted due to the predictability of climate impacts and if climate impact is predictable, then investors, borrowers, and lenders can all make informed decisions on the basis of those projections, and those outcomes are less likely to go off the rails as a result.
Key learning objectives:
Outline the micro-level evidence for the impact of climate change on the financial system
Understand why financial costs relating to climate change have so far been muted
Describe the hedging strategies in relation to climate change
Outline the value of building early detection systems into strategy