Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms' credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises...

Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms’ credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises...

The substantial economic transformation required to mitigate and adapt to climate change will lower the value of certain businesses as well as some firms' assets in the not-too-distant future. Firms will need to transition to a less carbon-intensive business model, but may do so at different...

We put climate risks in the perspective of model risk using a model in the wide sense. Climate risks are systemic risks and may be clustered according to so-called volatilities, uncertainties, complexities and ambiguities (VUCA) criteria. The dominating VUCA component of climate risk is...

Climate change poses a substantial risk to financial markets and corporations. Companies need to measure the magnitude of the carbon risk they are facing and address possible consequences. Currently, almost all metrics to analyse carbon exposure relate to the carbon emissions of firms (either...