Climate Risk and Financial Markets

Part of the Climate Finance project

There is a growing body of evidence that global financial markets are underestimating risks associated with climate change and related costs when valuing publicly traded firms as well as municipal government debt and sovereign debt. As climate conscious countries succeed in suppressing demand for oil and gas in the coming decades, national debts of oil producing nations could rise and leave a portion of state-owned oil and gas assets no longer monetizable. We investigate the remedies needed to prevent climate change related shocks from leading to failures in private insurance markets or credit markets.