Mainstreaming of Climate Risks and Opportunities in the Financial Sector. Work package 3: "Products and Procedures for the Management of Climate Risks"

  • Project no.3422
  • Duration 08/2006 - 12/2009

Along with partners from practice as well as with respective stakeholders the Wuppertal Institute is going to develop tools and procedures for quantifying and controlling risks and opportunities related to climate change for investment decisions in the asset management.

The objective is the development of new and suitable methods and products that enable analysts and investors to integrate risks due to the climate change in their daily businesses. To ensure the feasibility of the implementation and the connectivity the new methods and tools will be geared to existent methods of sell-side analysts, asset manager, banks and insurance companies.

The main focus lies on the development of new models and methods of risk valuation. Existing statistical methods that proceed existing trends are not able to take into account the fast changing frameworks and regulations regarding the climate change. Therefore they are not suitable for statistic inferences of future developments and risk structures under uncertainty. A promising approach are Bayesian methods in risk management that allow a better consideration of consequences of climate change and their financial impacts. These developed methods and tools will be tested and jointly implemented with participating research and practice partners.

The dissemination of the results is ensured by specific documentation of the results and workshops for the target audience. Furthermore, it is planned to feed the results in networks of financial market stakeholders to achieve a mainstreaming of climate risk management and the developed methods.

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