Managing the financial risks of climate change and pandemics: What we know (and don't know)

Ranger, N., Mahul, O., & Monasterolo, I. (2021). Managing the financial risks of climate change and pandemics: What we know (and don't know). One Earth 4 (10) 1375-1385. 10.1016/j.oneear.2021.09.017.

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Project: CAScading Climate risks: towards ADaptive and resilient European Societies (CASCADES, H2020 821010)


The COVID-19 pandemic is generating the largest shock in the global economy since 1929. Although the pandemic has been unprecedented in scale and type, such complex, compounding shocks are not uncommon and are more likely in our modern, interconnected world. Our ability to assess and anticipate compounding risks is limited. Here, we propose a framework for assessing the economic losses associated with compounding climate, economic, and pandemic shocks. We propose a new metric, the compound risk multiplier, to measure the scale of the amplification effect and find that this can peak at over 150%; that is, the GDP impacts of the compound shock can be 50% larger than the sum of the individual shocks. Our results suggest that ignoring compounding risks could be a major blindspot in our ability to prepare for future crises. This underlines the urgency of accounting for compounding shocks within financial, fiscal, and crisis risk management.

Item Type: Article
Uncontrolled Keywords: climate change; economics; risk; government; financial institutions; COVID-19; systemic risk; pandemics; fiscal; financial risk; macroeconomic; compound risk; policy; risk management
Research Programs: Energy, Climate, and Environment (ECE)
Energy, Climate, and Environment (ECE) > Sustainable Service Systems (S3)
Depositing User: Luke Kirwan
Date Deposited: 27 Oct 2021 07:09
Last Modified: 27 Oct 2021 07:09

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