Climate Change (July 2020)

Introducing The FinReg Blog Special Issue: Climate Change and Financial Markets – Risk, Regulation, and Innovation

In a world turned upside down by COVID-19, it is difficult to keep track of the remorseless impacts that are being inflicted by global climate change. Yet, the science becomes clearer and clearer by the day, and the impacts are steadily affecting financial markets, themselves roiled by the virus. The connections between climate change and pandemics have become ever more salient. Both are a constant presence in our world that can periodically flare up and ravage cities, regions, or even – as we are presently witnessing – the world. The pandemic response playbook has been known, if not followed, for some time. But the playbook on how to leverage the financial system to combat climate change, and to insulate it from its worst effects, is a work in progress. Therefore, we believe it is more important than ever before to focus on the complex interaction between climate change, financial markets, and financial stability.

Reflecting the international and interdisciplinary scope of these interactions, this special issue of The FinReg Blog, Climate Change and Financial Markets – Risk, Regulation, and Innovation, includes scholarship and analysis from practitioners and researchers spanning multiple disciplines and institutional contexts. Every day for the next month, we will publish pieces that discuss aspects of climate change and financial markets from the following perspectives:

        Risk Measurement and Management

        Regulation and Supervision

        Corporate Governance

        Monetary Policy

        Environmental Justice

        Macroeconomics of Climate and Health Crises

        Market Adaptation and Financial Innovation

Together, the posts in this special issue highlight promising approaches to climate-related financial risk, regulation, and innovation and the need for collaboration among interdisciplinary researchers, financial industry practitioners, and policymakers in addressing this topic of critical importance to economic and environmental resilience.

This special issue builds on The Global Financial Markets Center’s broader work on climate change and financial markets. In October 2019, we hosted a conversation between Commodity Futures Trading Commission (CFTC) Commissioner, Rostin Behnam, and former Deputy Treasury Secretary and GFMC Distinguished Fellow, Sarah Bloom Raskin, on the risks that climate change poses to the stability of our financial system. This event came on the heels of Commissioner Behnam’s establishment of the CFTC’s Climate-Related Market Risk Subcommittee. In May 2020, the Center submitted a public comment letter related to the topics and issues being addressed by the Subcommittee.

The Center’s faculty director, Lawrence Baxter, also taught a seminar on Climate Change and Financial Markets during the spring 2020 semester. The seminar allowed Duke Law students to examine the ways in which financial markets contribute to and can mitigate climate change, as well as the impact of climate change on financial stability.

In April 2020, the Global Financial Markets Center, Center for International & Global Studies, Nicholas Institute for Environment Policy Solutions, and the Duke Center on Risk planned on co-hosting “Too Big to Ignore,” a one-day symposium that was designed to explore how climate change threatens financial stability and the implications for financial markets regulation and innovation.  We were forced to postpone the symposium due to the pandemic, but our hope is to reschedule the conference in for April 2021.

The Center also engages stakeholders within and outside Duke University on projects related to climate change and financial markets. We are presently working with colleagues across the university on a pre-catalyst grant that seeks to understand the underlying issues in producing, reporting, and applying environmental, social, and governance (ESG) data to motivate business and financial action on climate change, with the ultimate goal of developing an ESG Lab at Duke. We are also excited to announce the creation of a new partnership with the Nicholas Institute for Environment Policy Solutions and the National Whistleblower Center to launch the Climate Risk Disclosure Lab, which will serve as an information hub on climate risk disclosure laws and opportunities for improving them.

Finally, The FinReg Blog remains an indispensable resource for discovering the latest scholarship and analysis related to climate change and financial markets. Prior to this special issue, we published a number of pieces that touch on climate change and financial markets, and we will remain focused on this topic in the years to come. If you are interested in publishing on the blog, please email us at Law-gfmc@law.duke.edu.

We would like to thank all the authors who contributed original pieces for the issue and the blog’s managing editor, Sherry Zhang, for sourcing and editing all submissions. We hope you enjoy this special issue – a first for us – as much as we enjoyed putting it together.

 

Sincerely,

 

Lee Reiners: GFMC Executive Director and editor-at-large of The FinReg Blog.

Lawrence Baxter: GFMC Faculty Director

Mercy DeMenno: Principal, Bosque Advisors and GFMC Nonresident Fellow

 

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