Decrypting the Triad of Climate Policies, Macroeconomic Interdependencies and Quantitative Modelling : A Literature Review on Quantifying Climate Risks

This structured keyword-based literature review analyses the quantification of climate risks and their impact on financial markets and economic influences. Through an extensive examination of existing research, we extract core statements, critical success and risk factors, applied datasets, implemented quantitative methods (e.g. models, algorithms or tests) and core empirical results. Further, we identify a holistic trinity of relations that form the core pillars of this complex domain encompassing (1) policy-level considerations, (2) macroeconomic effect chains as well as market-level dynamics and (3) quantitative modelling methodologies. According to the analysed research articles, it shows that a comprehensive understanding of at least two of these three pillars is essential for effectively identifying, controlling and modelling climate risks. We thereby recognise the potential enablement of developing of policy-level solutions to combat climate change. By dissecting the challenges inherent in each denoted pillar, we shed light on the current state-of-the-art and emphasise the interconnectedness of these problems