EDHEC Climate Finance Highlights, Issue n°3, January 2025

EDHEC Business School - Climate Finance Highlights

Climate Finance Highlights
Issue n°3, January 2025

Welcome to the third edition of EDHEC's Climate Finance Highlights, delving into groundbreaking research and insightful discussions from our experts on climate finance. Driven by our institutes and initiatives, including the EDHEC Climate Institute, EDHEC Infra & Private Assets Research Institute, and Scientific Portfolio, this newsletter brings you the latest in cutting-edge research and practical applications. This quarter, we highlight the integration of high-resolution climate simulations into risk assessments, explore innovative strategies for decarbonisation, and examine the financial sector's role in climate-aligned investment. Our experts also introduce EDHEC’s new venture, which empowers investors to analyse and construct equity portfolios aligned with sustainable finance goals. Additionally, we address the economic impacts of climate change on global equity markets and the challenges of enhancing climate scenario modelling.

Latest Insights

For investors and industries, more granular information on physical risk impacts means a better adaptability to future shocks

In this interview, Nicolas Schneider (EDHEC Climate Institute) discusses how advanced climate-economic modelling uncovers localised vulnerabilities and delivers actionable insights. He highlights innovative methods to improve data, addresses gaps in global models, and emphasises the importance of adaptation strategies and robust projections to guide policymakers, investors, and financial institutions in understanding regional climate risks.

How to Think About Climate Change?

In this article, Riccardo Rebonato (EDHEC, EDHEC Climate Institute) draws on his latest book to "help the interested layperson reach her own conclusions about how we should tackle the policy challenges posed by climate change." Avoiding complex mathematics, it introduces readers to cutting-edge Integrated Assessment Models and demonstrates how modern economic approaches support rapid and decisive decarbonisation action to achieve the Paris Agreement targets.

Revolutionizing Sustainable Investment - A Deep Dive Into EDHEC’s New Fintech Venture

"Revolutionising Sustainable Investment: A Deep Dive Into EDHEC’s New Fintech Venture"

In this interview, Benjamin Herzog, Director of Scientific Portfolio (an EDHEC Venture), explores how EDHEC’s latest fintech innovation provides investors with the technology to independently analyse and construct equity portfolios. He delves into the mission of this venture, its role in addressing climate finance challenges, and how it empowers impactful, climate-aligned investment strategies.

[#dataviz] Finance and Climate Change: What Riccardo Rebonato Teaches Us

Discover, through a dedicated carousel, the professional background and research of Riccardo Rebonato, Professor at EDHEC and Senior Advisor at the EDHEC Climate Institute. For years, EDHEC Business School has been developing models and solutions to assess the economic risks of climate change and leverage financial tools for a sustainable and resilient economy. Riccardo Rebonato spearheads this ambition, applying his expertise and multidisciplinary knowledge to this crucial challenge.

Reference Publications

Beyond Carbon Price: a Scenario-Based Quantification of Portfolio Financial Loss from Climate Transition Risks
This paper introduces a model integrating firm-specific 'green' revenues, aligned with the EU taxonomy, with economic and energy variables from adverse transition scenarios. Unlike traditional stress tests, it considers operational cost and revenue channels to derive a conditional transition loss metric. Analysing 1,287 companies, the study highlights portfolio impacts ranging from 0.5-6%, with sector losses reaching 10-60% in areas like Utilities.
Attribution Analysis of Greenhouse Gas Emissions Associated With an Equity Portfolio: A Comparison of Existing Frameworks
Understanding the factors influencing greenhouse gas emissions in financial portfolios is essential for constructing and monitoring a climate-aligned investment strategy. This article compares several recent frameworks for attribution analysis, highlighting key drivers of portfolio decarbonisation and the methods used to isolate their effects. Based on these findings, the author proposes a generalised approach and recommends five models to help investors distinguish between exogenous and directly controllable drivers of emissions changes.

Videos and Podcasts