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Misleading Footprints. Inflation and exchange rate effects in relative carbon disclosure metrics

Author

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  • Artjom Janssen
  • Justin Dijk
  • Patty Duijm

Abstract

Financial institutions need robust statistics to measure and manage climate-related risks and determine their sustainability improvements over time The physical effects of climate change, such as more frequent and severe floods and extreme weather, can have a major impact on the financial risks facing the financial sector. The transition to a more sustainable economy can also lead to so-called transition risks. Due to climate policy, technological developments and changing consumer preferences, current investments in companies with relatively large greenhouse gas emissions can decrease in value faster than expected. At the same time, the investment choices made by the financial sector can ensure that sufficient capital is made available for the investments needed to achieve the goals of the Paris Agreement. The development of robust climate change statistics to measure both risk and impact is a key priority at DNB. Improving our confidence in backward-looking metrics such as carbon disclosure metrics, enables central banks and supervisors to determine the transition risks facing the financial sector, whether the financial sector is on the right track toward reaching its sustainability goals, and ensures that forward-looking tools such as scenario analysis and stress tests use better historical information to estimate financial risks.

Suggested Citation

  • Artjom Janssen & Justin Dijk & Patty Duijm, 2021. "Misleading Footprints. Inflation and exchange rate effects in relative carbon disclosure metrics," Occasional Studies 1901, DNB.
    • Handle: RePEc:dnb:dnbocs:1901
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    File URL: https://www.dnb.nl/media/3n1mbtnj/os-misleading-footprints.pdf
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    1. ., 2020. "Choosing one’s life," Chapters, in: Tax Tyranny, chapter 9, pages 131-144, Edward Elgar Publishing.
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    Cited by:

    1. Loyson, Philipe & Luijendijk, Rianne & van Wijnbergen, Sweder, 2023. "The pricing of climate transition risk in Europe's equity market," CEPR Discussion Papers 18289, C.E.P.R. Discussion Papers.
    2. Jan Willem van den End & Guido Schotten & Sophie Steins Bisschop, 2021. "Financing the transition: seizing opportunities for a green recovery," Occasional Studies 1902, DNB.
    3. Gourdel, Régis & Sydow, Matthias, 2022. "Non-banks contagion and the uneven mitigation of climate risk," Working Paper Series 2757, European Central Bank.
    4. Philippe Loyson & Rianne Luijendijk & Sweder van Wijnbergen, 2023. "The pricing of climate transition risk in Europe’s equity market," Working Papers 788, DNB.

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