The optimal transition to a low-carbon economy must account for adjustment costs in switching from dirty to clean capital, technological progress, and economic and climatic shocks. We study the low-carbon transition using a dynamic stochastic general equilibrium model with emissions abatement...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with rare disasters related to climate change. The novelty of this paper lies in linking carbon emissions...

This literature overview conducts a systematic study of how the climate related risks from global warming may affect financial markets. The climate related risk is divided into three subcategories, the environmental uncertainty, the economic climate risk and the climate policy risk, which all of...

There are concerns that climate-related physical and political risks are not yet properly reflected in asset prices. To address these concerns, we develop a dynamic asset pricing framework with two sources of rare disasters: macroeconomic events and climate change. We link carbon emissions and...

We propose and implement a method to identify shocks to transition risk, addressing key challenges regarding its definition and measurement. Our shocks are instances where significant new information about the economic relevance of climate change increases the valuation of green firms over brown...

We study whether floods can affect financial stability through a credit risk channel. Our focus is on the Netherlands, a country situated partly below sea level, where insurance policies exclude property damages caused by some types of floods. Using geocoded data for close to EUR 650 billion in...

Climate change poses significant challenges through rising temperatures, extreme weather events, and the exposure of economic (and societal) systems to these dangers. The irreversible and potentially non-linear nature of climate change, together with evolving technological and policy landscapes,...

We assess the potential financial risks of current and projected flooding caused by extreme weather events in Canada. We focus on the residential real estate secured lending (RESL) portfolios of Canadian financial institutions (FIs) because RESL portfolios are an important component of FIs'...

Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect - or systemic - implications of these direct effects. We apply this framework...

Global climate change is increasing the frequency and severity of natural disasters. We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray wildfire, the costliest wildfire disaster in Canadian history, on consumers' financial stress. We focus on the arrears of...