Conference Agenda

This study investigates the dynamic and nonlinear propagation of systemic risk across global environmental and energy sectors using time-varying parameter vector autoregression (TVP-VAR) and quantile vector autoregression (QVAR) models. Employing data from eight indices representing global environmental, ecological, green energy, and brown energy markets, we examine how systemic risk transmission varies under bearish, normal, and bullish market conditions. The results reveal that environmental and ecological markets consistently act as net transmitters of systemic risk, while energy markets, encompassing both green and brown sectors, primarily serve as net receivers. Both climate transition and physical risk significantly influence systemic risk across environmental, ecological, green energy, and brown energy markets, with notable variations contingent on market conditions. Climate transition risk exerts a stronger influence on systemic risk than climate physical risk, particularly during extreme market conditions. The magnitude of climate transition risk is consistently higher across different quantiles of systemic risk. The nonlinear impacts of climate risks on systemic risk emphasize the potential of green swan to exacerbate systemic vulnerabilities of environmental and energy sectors, particularly under conditions of heightened market stress. The study underscores the urgent need for adaptive risk management frameworks to address transition uncertainty in green energy markets and the risk of stranded assets in brown energy markets. By providing actionable insights for policymakers, investors, and risk managers, this study contributes to a deeper understanding of how climate risks shape systemic risk dynamics across environmental and energy sectors, paving the way for more resilient and sustainable financial systems.

This paper examines the impact of climate-driven disasters on commodity prices. Using extensive archival sources including census data and declassified CIA intelligence reports, I develop a global geospatial dataset to identify the locations of key commodity-producing sites at subnational level since the 1970s. By linking these regions to climate disaster events, I find that, over time, production has become increasingly concentrated in high-risk areas. Leveraging this dataset, I analyze how commodity futures respond to climate-driven shocks and uncover significant cross-sectional differences. Specifically, a long-only portfolio of vulnerable commodities yields a significant monthly alpha of 0.90%, whereas that of resilient commodities, albeit still significant, is negative at -0.43%, reflecting a premium paid for protection against climate shocks. Furthermore, I find that vulnerable commodities experience slower recoveries from past shocks.

This study examines how firms adjust their inventory levels in response to climate risks. Using a large dataset, the research finds that firms tend to increase inventory levels as a precaution against climate-related disruptions, especially in countries with organised labour and high product market differentiation. Conversely, firms with strong environmental policies and greater climate risks awareness are more likely to reduce inventory levels. The relationship between climate risk and inventory management has intensified since the Paris Climate Agreement, particularly for firms with high agency costs, labour-intensive operations, or growth/maturity phases. The study provides valuable insights into corporate risk management and contributes to the literature on climate risk and managerial accounting regarding inventory based strategies.

The introduction of the EU Carbon Border Adjustment Mechanism (CBAM) has triggered statistically significant negative stock market responses for firms within the EU. Comparing EU customers that have non-EU suppliers in CBAM-affected industries with their nontreated peers in the control group, we find an extra cumulative abnormal return of up to -1.3 percentage points over our main five-day event window around December 13, 2022. Furthermore, we document substantial anticipatory market responses reflecting updated beliefs about broader climate policy developments going forward. This paper is the first to provide empirical evidence of carbon border tax impacts on firm valuations through international supply chains. Our findings contribute to the understanding of climate policy transmission through international trade networks and inform the debate on stranded assets resulting from environmental regulations.