EDHEC-Risk Climate Impact Institute

Are you interested in the evolving landscape of climate finance and its transformative effect on global markets❓ On November 12, join an insightful webinar with Professor Marcin Kacperczyk from Imperial College London, as he presents his pioneering research on Net-Zero Portfolios (NZP). Professor Kacperczyk will discuss how these portfolios, designed to reach zero #carbonexposure by a target date, are aligning investor incentives with climate goals and impacting the transition strategies of carbon-intensive companies. A key focus of this session will be his introduction of the “distance-to-exit” (DTE) metric—a novel, forward-looking tool that estimates the years until a firm might be excluded from NZP. With findings that firms with a longer DTE have higher valuations but lower expected returns, this metric offers a valuable perspective on carbon-transition risk. Moderated by Riccardo Rebonato, Scientific Director of #EDHECRiskClimate and Emmanuel Jurczenko, Executive Director of Graduate Finance Programmes, EDHEC Business School, this session provides insights into innovative #climatefinance metrics and their influence on asset valuation. More info & registration here 👉 https://lnkd.in/g9eE3F8d #MakeAnImpact #FutureOfFinance #ClimateFinance #ClimateRisk #TransitionRisk #NetZero

📗 #FridayReads Amid growing pushback on #ClimateAction, how can investors better integrate value chain emissions into decision-making? Indirect emissions (#Scope3) are critical for understanding an organization’s climate impact, yet disclosure remains inconsistent and fragmented. For investors, reliable and accurate data is essential to mitigate #greenwashing risks and manage transition risks effectively. In a white paper by #EDHECRiskClimate Director Frédéric Ducoulombier, discover how improved reporting standards can help investors manage risks and make strategic decisions amid mounting environmental scrutiny. 🔗 Link to the white paper in the comments. #ClimateFinance #Scope3 #SustainableInvesting #ClimateReporting

#TuesdayRelease 📗 We are delighted to see the work of EDHEC-Risk Climate Research Director Dominic O'Kane on climate beta estimates recognized as practical and actionable research by Portfolio Management Research. https://lnkd.in/dGcXjbkx In Investigating the Influence of News Sources and Language Models on Climate Beta Estimates, featured in the December 2023 special issue of The Journal of Portfolio Management on novel risks, EDHEC Business School Professor O’Kane and his co-author Jean-Michel MAESO, analyse unexpected #climate news drawn from 15 years of data across five reputable news sources. They find that aggregated climate news has a negative and statistically significant impact on the returns of brown stocks (those with higher carbon intensity). Practical Applications ✔️ An index of unexpected climate news has a negative relationship with the returns of brown stocks. ✔️ Detecting an effect of climate news on brown stocks requires the aggregation of multiple news sources. ✔️ In constructing a climate news index, the most sophisticated language model did not outperform a simple attention-based model. This article is based on research conducted under the chair "Measuring and Managing Climate Risks in Investment Portfolios," established with the support of Amundi.  #ClimateFinance #ClimateRisk #CarbonIntensity #ClimateBeta #EnvironmentalRisk #NaturalLanguageProcessing

What is the impact of climate change on equity valuation ❓ Join us at Scientific Beta Days Europe on November 27 in London to discuss our latest insights. Our expert, Riccardo Rebonato, has been invited to present his recent research backing a combined probabilistic approach to #equity valuation for transition and physical risk, emphasizing the importance of state-dependent discounting. During his presentation, EDHEC Business School Professor Rebonato, Scientific Director #EDHECRiskClimate, will examine the following topics: ✔️A combined probabilistic approach to equity valuation for transition and physical risk ✔️The importance of state-dependent discounting  ✔️ A Minsky moment or death by a thousand cuts? More information ℹ https://lnkd.in/dtqzTCVC Registrations 👉 https://lnkd.in/dSqJFAtb #ScientificBetaDays #EquityInvesting #SustainabilityInvesting #ClimateFinance

📰 Discover the 2nd edition of EDHEC’s Climate Finance Highlights! Driven by our institutes and initiatives, including EDHEC-Risk Climate, EDHEC Infra & Private Assets Research Institute, and Scientific Portfolio, an EDHEC Venture, this newsletter brings you the latest #climatefinance cutting-edge research and practical applications. This quarter, we delve into the growing demand for transparency in #climaterisk assessments, the essential role of finance in driving the #climatetransition, and the need for more robust climate scenario models. Our experts also discuss #decarbonisation strategies, the financial sector’s contribution to climate action, and the potential costs of inaction on #infrastructure #sustainability. 📖 To read this newsletter online 👉 https://lnkd.in/dDNjFNgi ✉️ To subscribe to this quarterly newsletter, please contact maud.gauchon@climateimpactedhec.com 🔍 To discover the hub dedicated to EDHEC Business School's Climate Finance Research 👉 https://lnkd.in/dFZzTNCn #MakeAnImpact #AStepForward #ClimateChange #ClimateFinance 

#TuesdayThoughts 🙏🏻 “To be recognised with the “Legends in Quantitative Finance” award is an exceptional honour, especially following in the footsteps of pioneers like Oldrich Vasicek and Helyette Geman. Throughout my career, I have been fortunate to work with brilliant minds, both in academia and industry, who have shaped my thinking and inspired my research. This award reflects the spirit of #quantitativefinance—an area where theory meets practice in the most profound way. My work at EDHEC Business School, particularly with the Climate Finance Institute, continues to focus on this vital intersection of theory and practice”, said Riccardo Rebonato, commenting on this prestigious recognition. We look forward to Professor Rebonato’s continued contributions to #climatefinance and the broader field of quantitative finance. 🔗 https://lnkd.in/dvNxhAD9 #MakeAnImpact #AStepForward

📗 #FridayRead “The agency of greenwashing” - Research by EDHEC Business School Professor Gianfranco Gianfrate on the relationship between greenwashing and corporate governance has just been published in the latest issue of JMG - Journal of Management and Governance. As #climatechange increasingly challenges business models, the disclosure of firm environmental performance draws growing attention from corporate stakeholders, creating more opportunities and incentives for greenwashing behaviors. The authors propose a novel set of measures to capture #greenwashing and investigate the link between greenwashing and corporate governance features that traditionally mitigate agency problems. They show that: ✅ Firms with more independent directors tend to greenwash more, ✅ The presence of female board directors is positively associated with greenwashing, though not always statistically significant, ✅ The effect of board size on greenwashing remains ambiguous. Importantly, the research finds that greenwashing negatively affects firm value. This research was co-authored with Marco Ghitti and Lorenza Palma. 👉 The full-text article is available in open access here: https://lnkd.in/dk2FbnmS #ESG #CorporateGovernance #Valuation #FirmValue

Key Takeaways from Reuters Events: Sustainability Europe 2024 💡 We are pleased to share a summary of the panel discussion "What’s Next for the SFDR and Sustainable Fund Labels," by Frédéric Ducoulombier, Director of EDHEC-Risk Climate Impact Institute: https://lnkd.in/dWUermrW Some takeaways: 🏷️ SFDR Review & Product Naming: panel discussed the significance of the recent European Securities and Markets Authority (ESMA) guidelines aimed at reducing #greenwashing. These guidelines ensure that funds using #ESG or sustainability-related terms are adhering to stricter criteria, with at least 80% of investments aligned with disclosed sustainability objectives. This measure is crucial for improving transparency and safeguarding investors from misleading claims. 📊 Data Challenges: Frédéric emphasized the ongoing challenges around #SFDR compliance due to inconsistent data quality. The phased implementation of the Corporate Sustainability Reporting Directive (#CSRD) means fund managers are relying on estimated data, creating difficulties in aligning investor-level disclosures with actual investee company reporting. ♻️ Transition Finance: A major point of discussion was the lack of a clear definition of "transition finance" in the SFDR framework. This gap restricts Article 9 funds from fully engaging in brown-to-green strategies, especially where investee companies might still have significant environmental impacts, limiting the ability to finance necessary transitions. 🔎 Future Outlook: The panel recognized the European Commission’s recent recommendation on transition finance as a positive step forward. However, the need for clearer definitions and a more robust framework to ensure that #transitionfinance aligns with sustainability objectives was emphasized. These discussions underscore the importance of refining SFDR to enhance transparency, address data inconsistencies, and support the transition to a sustainable economy. A huge thanks to Christian Hickmott, who gave us the opportunity to discuss these key topics, and to Nathalie Dogniez, Chair of Eurosif, and Raphael Tietmeyer, for their valuable contributions. #SustainableFinance #GreenInvesting #CSRD #ClimateImpact #ClimateFinance #AStepForward

[#PressRreview] How much attention should we pay to the risks of a climate-related crash❓ The research, done by EDHEC Business School Professor Riccardo Rebonato and his team, with the financial support of Scientific Beta, upgrades a popular integrated climate economics model and extends climate-aware valuation techniques to capture the considerable uncertainty in #climatechange and its economic impact, discount cash-flows at a state-dependent rate, and consider the impact of both transition costs and physical damages. Key finding in numbers: 📉 A potential 40% drop in global stock valuations if we fail to curb greenhouse-gas emissions.  📉 Losses of over 50% when considering climate-change-accelerating tipping points 📈 A possibility of limiting losses to 5-10% if we successfully limit warming to 2°C above preindustrial levels. 🗞 Access the article by John Kostyack for Forbes 👉 https://lnkd.in/duKs9CRZ 📖 Read our White Paper for an in-depth analysis 👉https://lnkd.in/dzHCf3r7

👏👏👏 Congratulations Dr. Schneider! We are delighted to announce that Nicolas SCHNEIDER, Senior Research Engineer and Empirical Macroeconomist at #EDHECRiskClimate, successfully defended his PhD thesis on September 30, 2024. His thesis, titled "Econometrically-Estimated Weather Sensitivities and Projections of Mid-Century Climate Change Impacts on Economic Systems," was supervised by Professor Ian Sue Wing at Boston University. Nicolas’ research quantifies the mid-century impacts of climate change on key economic sectors like agriculture, energy, and health, drawing on large-scale processing of climatic variables across geographic regions over time (climate fields) to project climate shifts and their economic outcomes using spatial climate econometrics. At EDHEC-Risk Climate, Nicolas is expanding our capabilities in this area, allowing us to better project and distribute the economic impacts of #climatechange under major warming scenarios. Prior to joining EDHEC Business School in 2023, Nicolas taught at Harvard University and in the Quantitative Methods Seminar of the Oxford Smith School. He has also consulted for the New York City Mayor’s Office of Climate. More info here: https://lnkd.in/d25pkADh #MakeAnImpact #AStepForward