transition

risk

Climate mitigation policies, including the introduction of carbon pricing (carbon taxes, emissions trading schemes) are a climate-related transition risk of particular concern to financial institutions who are exposed to investments or counterparties with current or potential future carbon pricing liabilities. This concern will only increase as the incidence of carbon pricing is expanded and as the prices already faced by companies rise or look to rise.
Critically, to tackle climate change, carbon pricing will have to cover increasing swathes of the global economy, with prices rising in a way that motivates rapid emission reductions and, ultimately, carbon removals. In parallel, carbon border adjustment mechanisms to address carbon leakage are being explored by major economies around the world. This would levy carbon prices on imports at the border to ensure that exporters, as well as domestic producers, face consistent and fair carbon prices.

our current projects

FLAGSHIP 4

Quantifying transition risks using consistent carbon pricing and emissions data and analytics, including for carbon border adjustment mechanisms.