Climate and Financial Markets

Catalog description

Climate change might be the defining challenge of our times, with a wide range of effects on financial markets and the broader economy. We examine how climate risks—both physical and regulatory—affect firms, traditional financial markets (including equity, debt, insurance, and real-estate markets), and markets for carbon, energy, and data centers. We also examine the role of firms’ disclosures and third-party information sources, such as carbon disclosures, reporting and rating agencies, and the impact of greenwashing. Investors in financial markets shape the transition to a net-zero economy directly through their influence on corporations and indirectly through their portfolio-allocation choices. Moreover, climate risks shape decisions inside organizations, such as spin-offs, hedging, and the structure of executive-compensation contracts. Finally, we study how governments and private investors finance investments in climate technologies. We discuss various financial instruments that have been developed to spur growth in clean tech investment. Given the enormous importance of electrification as a pathway towards a low-carbon future, there is special emphasis on renewable energy finance and economics, including its role in meeting the surge in power demand from AI and vehicle electrification.