Research: The Anthropocene Reality of Financial Risk

Professor Beatrice Crona of Sustainable Finance Lab, has together with Professor Carl Folke and Associated Professor Victor Galaz published research on the importance of integrating a broader conceptualization of climate and environmental risk into financial risk frameworks. Generating insights based on their expertise in Earth System Science, Financial Systems and Ecological Economics they explain and illustrates why this is absolutely vital to succeed in empowering financial actors and society to deliver on sustainability goals and mitigate possible systemic risk.
Genre photo of land being used by humans.

Together with Professor Carl Folke and Associated Professor Victor Galaz Professor Beatrice Crona of Sustainable Finance Lab earlier this year published the article, The Anthropocene Reality of Financial Risk. The article highlights the importance – for the future of the planet as well as for financial actors themselves – of closing the cognitive ’disconnect’ which exists in financial risk frameworks today.

This disconnect entails that the most common ESG standards do not sufficiently recognize the multiple, often complex, mechanisms by which environmental change unfolds and is aggravated by a range of investments. One of the issues being that these frameworks too narrowly focus on GHG emissions, which becomes a problem as scientific evidence reveals that a stable climate is not just simply determined by GHG emissions but by a complex set of interactions between human activities and large-scale biological, geological, and physical processes. Explaining further, as well as illustrating through examples, in their article this cognitive disconnect and how closing it is important to mitigate and reduce future financial material, and systemic, risk, the authors makes the case for integrating a broader conceptualization of climate and environmental risk to avoid devastating impacts on the economy, society, and biosphere as a whole. In addition the article also puts this research into context of what this entails for the ability of the financial sector, as well as for society, to deliver on sustainability ambitions and goals.  

This brief summary only scratches the surface of the insights of the article, to read about this issue more in depth access the article here.

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