The growing threats of climate related extreme weather events pose significant risks to financial markets. However, existing models of the financial impacts from climate-related events may incorrectly lead analysts to believe that there is little material risk in the short and medium term. Conning’s new white paper, co-authored with the University of Maryland, introduces a novel approach to modeling the interaction between climate-related physical and transition risks. The inclusion of tipping points provides a more robust way of quantifying the possibility of large financial impacts at time horizons relevant to regulatory reporting.
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