Climate Finance

In this article, we review the literature studying interactions between climate change and financial markets. We first discuss various approaches to incorporating climate risk in macrofinance models. We then review the empirical literature that explores the pricing of climate risks across a large nu...

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Bibliographic Details
Published inAnnual review of financial economics Vol. 13; no. 1; pp. 15 - 36
Main Authors Giglio, Stefano, Kelly, Bryan, Stroebel, Johannes
Format Journal Article
LanguageEnglish
Published Annual Reviews 01.01.2021
Subjects
climate change
climate risk
environmental, social, and corporate governance
ESG
JEL G10
JEL Q54
physical risk
transition risk
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Summary:In this article, we review the literature studying interactions between climate change and financial markets. We first discuss various approaches to incorporating climate risk in macrofinance models. We then review the empirical literature that explores the pricing of climate risks across a large number of asset classes, including real estate, equities, and fixed income securities. In this context, we also discuss how investors can use these assets to construct portfolios that hedge against climate risk. We conclude by proposing several promising directions for future research in climate finance.
ISSN:1941-1367
1941-1375
DOI:10.1146/annurev-financial-102620-103311