Vulnerable yet relevant: the two dimensions of climate-related financial disclosure

Monasterolo, Irene ORCID: and Battiston, Stefano and Janetos, Anthony C. and Zheng, Zoey (2017) Vulnerable yet relevant: the two dimensions of climate-related financial disclosure. Climatic Change, 145 (3/4). pp. 495-507. ISSN 0165-0009

Available under License Creative Commons: Attribution 4.0 International (CC BY 4.0).

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Market-based solutions to climate change are widely advocated by financial actors and policy makers in order to foster a smooth transition to a low-carbon economy. A first important limiting factor to this approach is widely recognized to be the imperfect information on investors' portfolios' exposure to climate-related risks. While better disclosure of climaterelevant information is often recommended as a remedy, the current lack of concise and comparable measures of portfolios' exposure to climate risk fails to provide major investors with the full incentives to reallocate their portfolios. A second limiting factor arises from the fact that in the context of the low-carbon transition, it is not clear how to measure the market share of participants because many economic sectors produce greenhouse gases (GHG) emissions or induce them along the supply chain. The lack of common and concise measures of the relevant market share hampers the ability of policy makers to ensure fair competition policies and the ability of major investors to assess the effects of their own and their competitors' portfolio reallocation. To address these two gaps, we propose two novel and complementary indices: (i) the "GHG exposure," capturing the exposure of single investors' portfolios to climate transition risks, and (ii) "GHG holding," capturing the market share of each financial actor weighted by its contribution to GHG emissions. We illustrate the use of the indices on a dataset of portfolios of equity holdings and loans in the Euro-Area, and we discuss the policy implications for the low-carbon transition.

Item Type: Article
Additional Information: Open access funding provided by Vienna University of Economics and Business (WU). We acknowledge the useful comments of two anonymous reviewers. We are grateful to Amal-Lee Amin and Gianleo Frisari from the Inter-American Development Bank and to Mauro Napoletano for fruitful comments on earlier versions of the manuscript. S.B. acknowledges financial support from the Swiss National Fund Professorship grant no. PP00P1-144689 and from the European Commission through the Future and Emerging Technologies (FET) projects SIMPOL (grant no. 610704) and DOLFINS (grant no. 640772), and the project SEI Metrics (grant no. 649982). The online version of this article ( contains supplementary material, which is available to authorized users.
Divisions: Departments > Sozioökonomie > Ecological Economics
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 27 Nov 2017 10:00
Last Modified: 06 Nov 2019 16:16
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