RESEARCH

We emphasize and encourage links between academic researchers and practitioners at financial institutions to bring theoretical techniques to bear on real-world issues.

Climate Change and Environmental Risk

Climate change is a critical global concern that presents issues associated with warmer temperatures, increased water scarcity, and more frequent and severe weather events. All these factors can threaten the financial sector and the economic security. The physical risks of climate change present a clear threat to operations, but new investment opportunities and product offerings are also needed to respond to the changing world needs.

GRI is engaged in expanding financial sectors understanding of climate-related risks and specifically in identifying proactive responses.


Climate Change and Long-Run Discount Rates: Evidence from Real Estate

In this paper, we estimate the term structure of discount rates for an important risky asset class, real estate, up to the very long horizons relevant for investments in climate change abatement. We show that this term structure is steeply downward-sloping, reaching 2.6% at horizons beyond 100 years. We explore the implications of these new data within both a general asset pricing framework that decomposes risks and returns by horizon and a structural model calibrated to match a variety of asset classes.

Managing Carbon Risk: A Look at Environmentally Conscious Indices

Increasingly, governments around the globe are implementing more stringent climate policies to help stimulate the transition to lower-carbon economies. This transition brings with it both risks and opportunities for the financial sector. In this study, we compare the carbon intensity and performance of ‘green’ equities portfolios (environmentally conscious indices) and traditional market portfolios (market indices).

A Target GDP Approach to Risk and Return in Climate Change Policy

Climate change is widely recognized as a serious risk that requires worldwide governmental action. Failing to act on climate change including the risk to the world’s financial systems by threatening financial resilience and longer-term prosperity.

Climate Change: Why Financial Institutions should take note

Climate change is one of the most significant environmental, economic and social challenges of our time. Download a copy of this report to learn more about this relatively new risk category whose impact on organizations will continue to grow.