Climate Change and the Economy of Finance

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The relation between climate the economy of finance is characterized by two feedback loops, as identified already by the european commission in two thousand 19. On one end, we have the impact of climate change and transition on the economy, and from there to finac. However, there is also an opposite feedback, which is what happens whene investors look at the potential impacts of scenarios of physical and transition risk,. decide to adjust their investment criteria. For instance, cost of capital for firms by cost of capital that banks provide tw firms bi their landing, and how these in turn affects the investment decision of firms in highe lo carbon goods.

Climate Week NYC is ending, and the United Nations Climate Conference known as COP27 is fast approaching. As the urgency to address climate change intensifies, financial regulators and supervisors are taking an increasing interest in climate change and the impact it is having on the financial system and the economy at large.

To get a better understanding of this landscape, we’re looking at some of the recent actions central banks have taken on climate in this episode of the ESG Insider podcast.

We speak to Irene Monasterolo, Professor of Climate Finance at French business school EDHEC, who tells us discussions at COP27 need to focus on adaptation both for developing and developed nations. We also hear from Stanislas Jourdan, Executive Director of the Brussels-based NGO Positive Money Europe, where he leads advocacy campaigns and research on the European Central Bank and monetary policy. And we speak to Danae Kyriakopoulou, Senior Policy Fellow at the London School of Economics’ Grantham Research Institute on Climate Change and the Environment.

"Climate change and its impact is generally very worrying, and we are seeing this the more data we gather, how urgent the need for action is and how unprepared we are if we do not step up action in time," Danae tells us. "That is certainly true also of the financial system and the banking system. It is relatively recent that we have seen the financial sector engage seriously with this."

Listen to our previous episode featuring an interview with Ravi Menon, Chair of the Network for Greening the Financial System, or NGFS, here: https://www.spglobal.com/esg/podcasts/how-central-banks-help-combat-climate-change-an-interview-with-ngfs-chair-ravi-menon

We'd love to hear from you. To give us feedback on this episode or share ideas for future episodes, please contact hosts Lindsey Hall (lindsey.hall@spglobal.com) and Esther Whieldon (esther.whieldon@spglobal.com).

Photo credit: Getty Images

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