The first effects of the climate crisis are becoming increasingly evident and are being felt by mankind. Some effects, such as the increase and greater intensity of droughts and extreme weather events, may lead to high economic and business losses. These economic consequences of the climate crisis represent a challenge for the state and the private sector. The Paris Climate Convention considers the handling of the physical effects of climate change in a separate article and sees the establishment of climate risk insurance as an option for companies and states. According to one of the project’s theses, economically efficient solutions could be developed in this way.
However, insurance alone cannot be used exclusively for risk transfer. Rather, companies must also make provision for risks in their activities. According to current knowledge, the consequences of the climate crisis still play a subordinate role in the strategic planning and operations of many companies. In addition, the question arises how climate-related risk management should be sensibly designed and where it should be integrated (e.g. risk management, environmental management, sustainability management).
If companies in the real economy suffer financial losses or even become illiquid due to the climate crisis, this also affects their investors. There is thus a danger that the consequences of the climate crisis will have an impact on the financial markets. This risk can be reduced by banks and investors systematically taking climate risks into account. To do so, they need climate-relevant information about their investment objects.
Against this background, the project will conduct research on the following topics:
Work Package 1: Climate risk insurance and its transferability to Germany
Work Package 2: Corporate reporting and management systems on physical climate risks
Work Package 3: Systematic consideration of physical climate risks in the financial sector
For each of these topics, the state of the art in research is reviewed, existing processes and procedures are presented in practice, concepts and recommendations are developed and expert workshops are held. Finally, instruments for the communication of the results to companies, banks and institutional investors are developed.
MCII is conducting Work Package 1 and actively exchanging with the other consortium members on the other work packages.
Our Project Partners
MCII partnered with the Frankfurt School of Finance and Management for this project.