EDHEC-Risk Climate: the first 2024 newsletter is out!

This article was originally published on edhec.edu - 02/2024 

We are delighted to present our February newsletter, providing breakthrough research on climate scenario analysis and stress testing, articles on scope 3 emissions data, internal carbon pricing, and discussions on green bonds and greenwashing challenges for financial regulation.

Frederic Ducoulombier, Director of EDHEC-Risk Climate opens the editorial, with an article entitled "Greenwashing Regulation", looking at the increasing calls to combat greenwashing in the financial sector. He reflects upon the European Union’s experience as the first-mover in the implementation of a sustainable finance framework and draw on our recent contributions to regulatory consultations to point towards required corrections and extensions to protect investors and foster the transition to a sustainable economy.

The feature “Bridging the Gap: Making Climate Scenarios Fit for Investors” summaries the key insights from our foundational White Paper on the probabilistic extension of scenario analysis and stress testing tools. The paper explains how to enhance the powerful IPCC framework with probabilistic data to improve its relevance for risk and investment practitioners. It uses empirical analysis to identify strong relationships between economic, demographic, and technological variables and derive valuable insights into the likelihood of various climate outcomes, including extreme events. By offering distributions of climate outcomes, such as temperature variations, damages, and cash flow impairments, this novel framework equips financial decision-makers with vital tools to effectively manage climate-related risks.

The newsletter includes:

• Scope for Divergence – The Status of Value Chain Emissions Accounting, Reporting and Estimation and Implications for Investors and Standard Setters: an expert’s view on the importance of integrating value chain considerations in financial decision-making and the challenges of emissions data;
• On the Triple Illusion of Double Materiality: a response to ISSB Emmanuel Faber's criticisms of the double materiality concept at the heart of the European Union's new sustainability disclosure regulation; 
• Measuring the Greenness of Green Bonds: a short industry analysis article by EDHEC Business School Professor Gianfranco Gianfrate looking at demand for green bonds and presenting research results on: (i) the value of Second Party Opinion into the quality of green bonds; (ii) the impact of the EU taxonomy of sustainable activities on the market; (iii) ownership of green bonds by Principles for Responsible Investment members vs. other institutional investors.
• Portfolio Losses from Climate Damages: A Guide for Long-Term Investors: a recent Position Paper elucidating the misleading nature of climate-risk advice given to pension funds;
• Value versus Values: What Is the Sign of the Climate Risk Premium?: a working paper discussing the sign of the climate risk premium;
• Complimentary access to our recent academic publications on the risk of a sudden price adjustment in relation to climate risks and on applying artificial intelligence to extract climate-risk information from news;
• Selected sustainability publications by EDHEC Infra & Private Assets Research Institute and EDHEC Business School faculty.

The newsletter also features an interview “Climate Risk Integration: A Global Investor Concern” with Felix Goltz, Scientific Beta Research Director, who discusses ESG integration in factor investing, the role of academic research, the strategic shifts in research themes over time, the rationale behind Scientific Beta's climate index series, and the Scientific Beta and EDHEC-Risk Climate research chair established recently to further research into climate risk modelling.

 
Additionally, it provides information on EDHEC-Risk Climate’s latest research publications, events, videos and news, and also includes a press review.

Access all articles here EDHEC-Risk Climate Newsletter - February 2024 Issue