studying

Explain the function and applicability of the different land-based, ocean-based, atmosphere-based, and space-based geoengineering typologies.

land based is most applicable, ocean based has the most push back, atmospheric based is possible but odd, space based is quite wild.

Describe the framework for assessing the economic impacts of Arctic change.

see below, essentially pros (left side) and cons (right side) analysis that tie in together for secondary impacts. The pros are more studied as of now, since economic impact is easier to gauge. The cons have effects outside of the arctic, so it is harder to scope and analyze.

Illustrate the pathways toward managing carbon asset risk along with the roles of various stakeholders.

see chart, but either new or old then avoid or manage. depends on actor. Usually involves sector focus and screening or divestment/diversification.

Explain the cyclical, meteorological, and temporal relationships between weather and climate.

cyclical: climate change affects extreme weather event occurrences over time meteorological (atmospheric): weather conditions largely depend on water vapor in the atmosphere, which directly affects rain and snow climates. temporal: weather is hard to predict over longer time spans, climate is easier since it is a long-term average.

Illustrate the link between climate change and fiduciary duty.

It is a fiduciary duty because of the risk of loss shown below. As such, managers much show that they have recognized risks, analyzed short/medium/long term, challenged individuals within and outside the organization, and established a processes to make decisions.

Discuss how a natural capital assessment, once completed, is utilized by businesses.

Literally same as above: Ascribing monetary value (at a national or global scale) to natural capital increases its visibility and could therefore promote sustainable practices and communication, and this approach has begun to gain popularity in the private sector.

Differentiate between private and public climate finance flows.

Project Developers (corporates) consistently drive largest volume Jump in 2015 due to private investors, so not really due to 'Paris Effect' (public side may be delayed though) Development Finance Institutions (large share of public finance 89% 2016), multilateral growing more than national (due to economic conditions) Multilateral, where public finance institutions have multiple countries as shareholders and finance flows internationally; Bilateral, where there is single country ownership of the public finance institution and finance flows internationally; National, where there is single country ownership of the public finance institution and finance is directed domestically.

Define and describe the different types of geoengineering.

(1) Using physical, chemical or biological approaches to removing atmospheric CO2 (so-called "Carbon dioxide removal, CDR"). Main CDR schemes include large-scale afforestation and reforestation (probably largest opportunity), biochar production (expensive), chemical weathering (too technical for me), CO2 capture and storage (BECS like Milo's tomato thing), ocean fertilization (marine phytoplantko) etc. (2) Increasing planetary albedo (so-called "Solar Radiation Management, SRM"). SRM approach is to adjust the amount of sunlight reaching the Earth in order to balance long wave greenhouse gas forcing. Main SRM schemes include injecting sulfur into the stratosphere to block incoming sunlight, putting sunshields/dust cloud in space to reflect sunlight, injecting sea salt into the air above the oceans to increase the reflectivity of clouds, etc.

Define climate-related scenarios and describe how they are used by organizations.

2°Celsius (2°C) scenario Consider using other scenarios most relevant to the organization's circumstances Nationally Determined Contributions (NDCs) Business-as-usual (greater than 2°C) scenarios Physical climate risk scenarios Characteristics: Plausible (narrative), Distinctive (different assumptions) Consistent (same interaction of factors) Relevant (bring in strategic and financial implications of climate risks) Challenging (discuss major sources of uncertainty) Mnemonic: PC R DMC? Fundamentally different from sensitivity analysis such as forecasting or VaR, mainly again due to long time horizon. Available public transition scenarios: start with IPCC (RCPs), IEA, with data from IIASA and CLIPC that can be accessed through pyam I think. WRI, EPA, UNEP, MOSAICC (Agriculture) are also options.

Discuss the implementation of various geoengineering methods along with their proposed costs and benefits.

A few SRM experiments that all ended due to public pressure or changes in the ocean that were worrisome (locked carbon, algae blooms) Land methods affect precipitation directly due to evapotranspiration and thus water availability. Also affects surface albedo. Oceans are the largest active carbon sink on Earth. Although the percentage of anthropogenic CO2 uptake by the ocean sink with respect to the total CO2 emissions has decreased during the last decade (Le Quéré et al., 2009), one third of the total anthropogenic CO2 emissions inventory is stored in the oceans. Some projects here make sense tbh, in plankton or ocean current manipulation to increase sink effect. AR4 didn't even consider geoengineering, AR5 has several sections on it.

Asses the differences in the approaches to GHG accounting and GHG reporting when consolidating GHG data.

Accounting is separate from reporting, though reporting should be encompassed by disaggregation's in the accounting.

Explain the requirements and suggested measures to take for each principle of responsible banking.

Alignment, Impact and Target Setting, Clients and Customers, Framework in Documents, Governance, Transparency Alignment Strategic alignment to be consistent with SDG and PA, to show shared responsibility for a sustainable future. Should have a document with clear strategy on how to align, and what the bank intends to contribute at a national, regional, or international level. First step to be identifying current activities, products, or services that are inconsistent with targets Management and board commitment is a must Consultation with stakeholders Impact and Target Setting Identify, assess, and improve impacts through reducing negative impacts and setting targets Integrating environmental and social risk into your bank's overall risk assessment. Develop new client/customer segments To meet their responsibility to respect human rights, banks are required to exercise human rights due diligence to identify, prevent, miti-gate and account for how they address impacts on human rights; and provide remediation for adverse impacts, which the enterprise has caused or contributed to. List of prohibited activities to finance https://group.bnpparibas/en/financing-investment-policies https://www.citigroup.com/citi/sustainability/policies.htm Clients and Customers We will work responsibly with our clients and our customers to encourage sustainable practices and enable eco-nomic activities that create shared prosperity for current and future generations. Recommendations split into those for retail, SMB, and institutional clients that allow for sustainability-linked loans or positive impact loans. (tech currently leading this space) Retail: PACE style green loans and mortgages, financial literacy SMB: Help support social enterprises and entrepreneurs in hubs, incubators, and supplier development programs. Financial literacy programs. Enterprise: Asking clients for their information on impacts, help identify new financial solutions for them that rely of sustainable business practices Alipay's Ant Forest Program represents the value of improving and making use of unique bank and retail customer opportunities. Alipay, as an online payment platform, rewards customers with points when they make small sustainable daily choices. Set out framework in documents: We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society's goals Focus of UN on transnational partnerships reflected here, asking for partnering as well proactive consultation and engagement with stakeholders. key external stakeholders (focus on affected ones): regulators, investors, governments, suppliers, customers and clients, academia, civil society institutions, communities and non-profit organizations (NGOs that represent communities/wildlife too) The IFC has issued a comprehensive guide to help companies with stakeholder mapping. Think of this as mapping out a societal license. Governance: We will implement our commitment to these Principles through effective governance and a culture of responsible banking Focus on education, awareness, and promotion to c-suite. Align lending policies with scientific and robust approaches, which may be developed via a multi-stakeholder process. Where available, use sustainability standards and certification systems developed via multi-stakeholder processes such as the ISO and ISEAL standards. Link sustainability related considerations to performance assessment and remuneration of staff. Transparency: We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society's goals. Align disclosures with the requirements of sustainability disclosure frameworks commonly used in the banking sec-tor, such as the GRI, Sustainable Accounting Standards Board (SASB), and Integrated Reporting (IR) frameworks. France has a binding law (Article 173-VI of France's Law on Energy Transition for Green Growth) on asset managers and institutional investors.

Analyze countries' obligations after joining various climate accords

Annex I has had various funding commitments and emissions reduction requirements (5.2% across the board at Kyoto, 5% of CDM goes to Annex II fund). Top down approach made the split pretty hard/uneven

Illustrate the methodologies that use scenarios as a basis for analyzing investments.

Applying to investments from transitional risk lens: bottom up vs top down approaches for ALM, strategic asset allocations (SSA) as a focus. tie to funding ratio (DNB), integration into insurance models (a.s.r.), use of 2x2 matrix of scenarios (policies x technology rapid/slow) to determine asset allocations/megatrends (PGGM), glide path probabilities to create a rules-based strategy based on proximity to trajectory (UBS), or other KPIs (Ecofys, whose methodology focuses on identifying key indicators of change (or signposts)). For portfolio-level, some existing tools are the PACTA tool (databases) which outputs a technology exposure gap, Bloomberg/Carbon Tracker Initiative, For asset-level, most tools are focused on valuation analysis and proxy voting. Can use for SBTs (particularly applicable in real estate), guidance in ET risk project. Not as many tools as portfolio-level. Can also combine the two, as AXA did to identify sectors for asset analysis Supply-side sectors at stake: energy, utilities, materials and transportation Demand-side sectors at stake: consumers, ICT, capital goods and real estate Barclays divides it into regulated and unregulated utilities as well as carbon intensity Applying to investments from physical risk lens: Databases: 427, database of over one million corporate facility sites and uses IPCC RCP 8.5 to model. Carbone4 Finance (for bank loan books), Acclimatise focused on agri, banking, energy, infrastructure, mining, O&G, retail, and transportation

Describe the impact of climate change on the Arctic.

Artic Amplification: As climate science predicts, the Arctic is warming much faster than the rest of the globe. This is often called polar amplification. Weakens northern hemisphere's jet stream, causing weather patterns to get stuck Reduction of reflective surfaces Rossby waves/jet streams from this

Identify the value of natural capital assessment for different stakeholders.

Ascribing monetary value (at a national or global scale) to natural capital increases its visibility and could therefore promote sustainable practices and communication, and this approach has begun to gain popularity in the private sector. Since the publication of the first Environmental Profit and Loss (EP&L) account by PUMA in 2011 and model since 2016, a small but growing number of businesses have begun experimenting with natural capital assessment.

Describe the four main stages of natural capital assessment.

Assessment is four steps (frame, scope, measure/value, apply). Basically the same as climate scenarios screening, model, metrics, alignment thing

Explain the adaptation strategies used in addressing sea-level rise such as migration.

Bilateral agreements Volunteer labor mobility Temporary evacuation to mainland in times of emergency (earthquakes or typhoons) Cultural adjustment (keeping classes and other services going through floods, raised gardens and vegetation change) including hard and soft adjustment measures (changes in infrastructure and community response)

Describe the recommendations for investors seeking to implement climate-related risk measurement.

Combine metrics

Illustrate the potential for low-CO2 strategies in a variety of operational and mainstream credit trading settings

CDS instead of Cash Bond Spreads: behavior can vary significantly over time even if default probabilities haven't changed, see relationship research here from Kim, Li, and Zhang (2017). Could be due to CDS being used for macro-hedges as well, instead of just underlying bonds. However, being long CDS does not actually provide any financing for underlying issuers and does not contribute to sustainable markets. The counterpoint is that CDS is very important for deciding the pricing, or cost of debt, for an issuer. In this way, shorting a CDS position increases cost of financing and reduces GHG score. When it comes to ECOBAR, we can't flip the sign after CDS since negative basis trades (bond spread lower than CDS spread) could leverage up and reduce the score of the portfolio significantly. Instead, we just do an inversion where 9 becomes 1, 6 becomes 2, roughly following kind of like an exponential decay function. Ultimately, we get where theta is share of MDC for the portfolio that belongs to some issuer n that is in a CDS and D is the sustainability score of issuer n at time t. Inversions are considered in theta as an absolute value where the score shifts along the inversion function. Good CDS indices to reference are iTraxx main and CDX.IG from Markit. Figures show that MDC contributions actually push the score up a bit to 3 compared to 2.5 in actual portfolio, due to CDS indices scoring around 4 on average. Overlaying MDC risk weight on top of the actual portfolio score, there is no obvious correlation between risk and declining score. On the right side, we see cumulative excess returns (not including reinvestments) plotted against ECOBAR scores.

Explain the process of carbon capture and storage and its role in reducing atmospheric CO2

Capture either pre processing (requires a special factory, currently expensive) or post (which is difficult due to how dilute the gasses become). CCS is still definitely one of the most proven ways of mitigating CO2 emissions,

Describe exposures to carbon risk at the sector and company level.

Carbon Asset Risk (CAR) has come to represent the risk that loans to, and investments in, carbon assets do not financially perform as expected, because of new policy, economic, market, and social trends that emerge within a global GHG-constrained economy.

Delineate the process for designing a scenario analysis for assessing climate risk.

Choose from climate risk scenario models: Land-use models (agriculture, bioenergy, water focused) Energy System models (energy-use chain) Climate models (GHG emissions -> climate) Macroeconomic models (changes in one part of economy effect on whole system) IAMs (socioeconomic factors/pathways embedded with all of the above Analyze acute hazards effect on macro, supply chain, ops and assets, and market based on exposure of counterparty, sensitivity to hazard, and adaptive capacity to hazard and mitigation (or ability to change customer base). Chronic hazards are less commonly analyzed in physical risk scenarios Carbon4 methodology covers the widest range of physical risks

Describe the significance of a green bond external review provider.

Confirm the alignment of program Disclose credentials and relevant expertise Types Second Party Opinion Verification Certification Additional Green Bond Scoring/Rating

Describe the significance of a social bond external review provider.

Confirm the alignment of program Disclose credentials and relevant expertise Types Second Party Opinion Verification Certification Additional Green Bond Scoring/Rating

Describe the lessons learned from bank piloting using case studies and results.

Considering the effort required, experts must be set up with the right resources and processes for calibration, including experienced team members, scenario information, and process guidelines. Throughout, experts must be empowered to experiment with evaluation methods to obtain results; set ting ground-rules is important, but changes to the evaluation methodology will arise throughout the assessment process. The calibration exercise shouId be iterative and feedback into the rest of the transition risk assessment process, including the segmentation process. Since this is the first time banks have undertaken the calibration exercise, methods and results should be discussed and challenged amongst industry and credit experts within each bank to refine the calibration process. Banks can challenge results through a variety of channels. Sector results can be compared across teams, and other internal experts can be consulted. Banks can compare results across institutions, if appropriate, and at a minimum should sense-check that the results are commensurate with the transition scenario. Cross-institutional conversations about calibration methods and challenges proved helpful over the course of this pilot. When challenging these results, banks may find that they need to revisit prior steps. Experts may determine that the initial segmentation was not at an appropriate level of granularity or that the sensitivities were under- or over-estimated. In a few cases during the pilot, segments were collapsed after a similar level of credit risk was assessed during calibration. Banks could also discover that the borrowers chosen for the calibration process were not representative of the segment.

Compare the Industry Catalogue, the Project Catalogue, and the EU Taxonomy in terms of scope and environmental objectives.

Covers six environmental objectives as well as screening criteria for 67 economic activities. To be eligible, an economic activity must make substantial contribution to at least one or more of the six environmental objectives, and does no significant harm (70% of which is already covered by EU environmental regulations) to the other five, and meets the requirements of the minimum Social Safeguards. China is more agriculture and ICT focused, and has less environmental objective coverage (see earlier DNSH). Differences here and there on scope and details. Compared with the Taxonomy which highlights climate change, the Industry Catalogue has a focus on pollution prevention and control without describing its background details and policy basis

Identify the environmental, health, and social impacts of storm surge and sea-level rise on island populations.

Crops forced to change (non-salt crops don't survive), livelihoods (fishing, other jobs), stress and unpredictability as well as economic set backs on movement. (see chart)

Explain the process for screening climate-related risks.

Define the main objective Select research provider Apply screen (w/ relevant metrics) Monitor climate-related risks Define subsequent action Report on climate-related risks

Illustrate the economic impact of various climate change scenarios and low-carbon economy transition scenarios on debtors.

Direct Impact Firms are directly impacted by climate risks through, e.g., disruptions in their own operations or direct damages to their assets from physical hazards and through, e.g., higher carbon prices or investment costs in low-carbon technologies as a result of transition measures. Key Parameters: Geographic Location of Firm (Physical); Higher Carbon Prices on Emissions (Transitional) Indirect impact Firms can also be affected by the consequences of climate change through the impacts on their supply chains or on their customers. Physical risks can generate disruptions for their suppliers or create changes in their input prices. They can also affect their customers and thus demand a firm's product and services. Similarly, transition risks can induce higher input costs and alter demand patterns. Key Parameters: Geographic Location of Customers/Suppliers (Physical); Investment to Reduce Emissions Macroeconomic Impact: Physical and transition risks have a broader impact on macroeconomic conditions. At the macroeconomic level, climate change can affect capital and labor productivity, prices of inputs or the aggregate demand from households\ Key Parameters: Climate Resilience of Infrastructure/Area (Physical); Adaptation of Stricter Low Carbon Standards (Transitionsal)

Explain how climate change can affect banks' borrowers and the financial performance of various sectors in direct and indirect ways.

Direct Physical Damage to fixed assets Changes in output Disruptions to supply chains Shifting patterns in demand for goods and services. Financial Weaken a company's balance sheet through loss of revenue as productivity declines, \ Impacts on asset values Increased costs as raw materials become scarce Operations need to change. The significance of the impacts will vary across geographies and time horizons, between different industry sectors and individual borrowers. Indirect Macro-economic impacts of climate change Changes in government policy and regulation on adaptation Response of the insurance industry to increasing risks = Possible effects on the financial health of borrowers

Describe the ECOBAR model and apply it to sample historical data.

ECOBAR uses ordinal (Ranking) versus cardinal (actual value) carbon measurement system. we apply it to a real traded credit portfolio that has been run at AP4 since 2011, accounting for factors such as credit derivatives and implied leverage and investments in green bonds. Long-short trading strategy, excluding worst tiers of issuers according to model Rank companies by CO2 impact using databases: carbon disclosure project (CDP). Score = G*(C*R) where S is between 0 and 9. from this you can get a risk weighted score, calculated as mod duration/market value of portfolio summed up for interest rate sensitivity. C is the sector carbon score. There is clear clustering by sector (utilities/materials/energy all at 1000 tonnes CO2, Consumer/Industrials/Financials/Consumer around 100, Telecom/Health Care/ICT/Real Estate around 30). The scores would go 3,2,1 in order of largest to smallest. R is the sector relative score of companies within a sector against each other. Their approach is to take the R-squared of CO2 with EV (could choose a different metric), and when it is higher than 10% rank based on normalized EV and if it is less than 10% then rank based on absolute emissions. Still should have three score levels for R, working like buckets. G is the green bond score, which works as a 0/1 flag. 0 is for if they have a green bond flag. They decided against a continuous approach (which could be used based on the shades of green scale or alignment of company).

Discuss geoengineering efforts within an economic, environmental, and social-based context.

Economic aspects beyond crude costing for geoengineering schemes have not been very well studied to date. Sudden cessation of aerosol geoengineering will result in rapid and dramatic climate change (termination shock) that leads to severe economic damages for future generations (Svoboda et al., 2011). Research on ethical and scientific analysis of stratospheric geoengineering is just at the beginning, more and more comprehensive researches will be carried out in the very near future (Tuana et al., 2012).

Assess how health risks can be minimized and avoided via assessments.

Effects are split into three key timeframes: immediate (hours/days/weeks): this is framed as normative response to disaster, and tends to subside after security/safety are established. mid-range (6 mo to 1 yr): these are long-term psychosocial stressor including anxiety, depression, stress (PTSD), and drug/alcohol abuse. beyond. Stigma and lack of data around mental health illnesses are a major impediment to stronger inclusion in CCHVAAs. Also multi-causality makes it hard to attribute towards climate events. International Classification of Disease (ICD) codes are the closes thing we have to monitoring and relating to broad mental health indicators. IASC (WHO) set guidelines on mental health/psychosocial support in emergency settings, with a strong toolkit in Disaster Psychological Assessment and Surveillance Toolkit (Disaster-PAST). It has responses for time periods that line up roughly to the timeframes of the effects mentioned above, screening for GAD-7 (Generalized Anxiety), CES-D (Depression), PCL-C (PTSD).

Identify and explain the three scientific sources of information from which IAMs are derived.

Energy System Models Historically about fossil fuels and and nuclear power Determine supply and demand of energy over forecast Economic System Models Market based economy functions Can be long or short term (myopic) Climate Science Models Integrates physics and chemistry of climate into models to translate pollutants and emission into GHG concentrations, RF, and Temperature

Explain the issue of carbon leakage.

Failure to protect energy intensive trade exposed (EITE) firms may lead to lower output and loss of employment in the jurisdiction with the tax or ETS and higher emissions elsewhere (to other countries without such systems)—a problem known as leakage (Branger & Quirion, 2014; Zhang & Zhang, 2016). These firms are given free allocation, usually.

Evaluate the rationale for the different types of climate models and explain the justification for the models' varying levels of certainty.

For temperatures: Better for longer periods of time and more regional-scale estimates. Uncertainty within how cooling from internal variability contributes, as well as how heat is redistributed within the ocean. For precipitation: better on continental scale, not regional (due to observational uncertainties). Cloud/aerosol models, monsoon prediction models, artic summer sea ice models, upper ocean heat models, carbon cycle (ocean-atmosphere CO2 flux) models that study sinks Climate sensitivity models (such as temperature conversion of radiative forcing) are still growing

Identify the financial challenges and opportunities related to investment in developing countries, distinguishing between private and social costs.

Fossil fuel facilities are relatively inexpensive to set up but require high recurring costs as fuels need to be purchased constantly. RE facilities are expensive to set up, but the energy source is for free or a minor cost factor, so that mainly operation and maintenance cost remain as recurring cost. Building of national electricity grid as well as remote microgrids/solar home systems to not have as many grid shutdowns/outages (costs 1-3% GDP) Protect local biomes from burning of fuels, damaging ecosystems The risk of reduced crop productivity and adverse effects on livestock due to heat and drought stress is very high in Africa. (but must consider how RE can be used in agriculture/food production, as this is tough.) Gender and education equality/access improved by having a reliable and clean energy source.

Explain the definition and purpose of a green bond.

Green Bonds are any type of bond instrument where the proceeds will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible Green Projects and which are aligned with the four core components of the GBP.

Identify the differences in green definitions across Europe and China.

Green definitions are more strict in Europe and cover a broader set of principles, China is more focused on ICT and agriculture, does not exclude fossil fuels

Describe the methodological challenges in estimating the credit risk impact of climate change.

Historical data limitations Too many variables and past is poor indicator of future Time Horizon of Models Needs to be longer than traditional model horizons (1-3 years) Granularity of Data Best data is at a household and firm level → very difficult to get Relevant Climate KPIs Materiality issue → what matters? what doesn't? Translating Economic Impacts into Financial Risk Measures FInding the exact impact on household and firms to see how it effect financial stability

Assess the differing perspectives of an island's ability to remain habitable amid current and forecasted sea-level rise.

Household questionnaire survey results revealed that the island communities generally preferred in situ adaptation strategies to relocation (perceived as evacuation to the mainland). Islands experiencing more severe flooding have had a greater incentive to invest in hard and soft measures, eventually no longer finding evacuation to the mainland necessary.

Explain the benefits of using an IAM approach to guide the fulfillment of the Paris Agreement's goals.

IAMs provide one tool, with strengths and weaknesses, in what should be a toolbox of measures, policies and broader considerations of how to shape the future of the energy system and climate change mitigation, and of sustainable development policies.

Describe the application of the results obtained by IAMs in relation to the goals of the Paris Agreement.

IAMs use the RCP pathways and SSP pathways from UN AR reports and research to provide impact analysis IAMs have been "surprised" in recent years by the dramatic cost improvements of renewable energy technologies compared to fossil fuels. A large part of this cost development has been due to behavior by consumers, and by governments deciding that more solar panels, wind turbines and, more recently, batteries and electric vehicles, would be a good long-term policy to support - not because those actions were inherently the most rational and optimal decisions. Will always say it will cost more Have hard time forecasting emission drops, dynamically Easier to model new tech that is similar to old tech (CCS & PV) Hard press to model switch to EVs Extent at which CDRs are apply vary

Describe some of the common global climate-related scenarios (e.g., "transition scenarios" and "physical climate scenarios") used by the scientific community.

IEA Transition Scenario IEA WEO Current Policies Scenario (projected to generate warming of 6°C) IEA WEO New Policies Scenario (projected to generate warming of 4°C) IEA INDC Paris Agreement Scenario (projected to limit warming to 2.6°) IEA Bridge Scenario (keeps world on path to 2°C limit to 2025, but more needed after 2025) IEA WEO 450ppm Scenario (projected to limit warming to 2°C) IEA ETP 205 Scenario (projected to limit warming to 2°C) 2C Transition Scenarios International Renewable Energy Agency (IRENA) REmap (2016) Greenpeace Advanced Energy [R)evolution (5th Edition) Deep Decarbonization Pathways Project (DOPP) IPCC RCP 2.6

Interpret how climate change affects precipitation patterns, storm surges, ice melt, and wildfires.

Heat waves: Cause: by increasing droughts Warming makes them more intense and frequent, last longer and cover larger regions 50 folder increase in land coverage of monster heat waves Can impact crops and social unrest Droughts: Cause: to drying, warming, and melting of snow and ice. Think of the melted reservoir mentioned in chapter 1 Impacting semi-arid regions - US Southwest and Mediterranean, as the driest regions found in the subtropics (two belts outside of the equator) are expanding to outer belts. Combined with high-pressure systems, you end up with blocking and thus the California drought of 2012-2015. Difference between precipitation driven droughts and hot weather droughts. The latter is worse for humans, animals, and crops. All lead to higher level of evaporation à water vapor effect "Runoff from winter snowpack—layers of snow that accumulate at high altitude—accounts for 60 to 80% of the annual water supply for more than 70 million people living in the western United States." Wildfires: Cause: Earlier springs/snowmelt play a role. Drier rocky mountain forests, affects insect infestation. This is because milder winters kill less larvae, on top of a longer mating season. Westerling et al. (2006) found that, in the last three decades, the wildfire season in the western U.S. has increased by 78 days, and burn durations of fires > 1000 ha have increased from 7.5 to 37.1 days, in response to a spring-summer warming of 0.87°C. Database: ENSO positive phases [El Niños], and higher Palmer Drought Severity Indices. Deluges: Cause: warmer atmosphere holds more moisture Most robust connection to global warming, "Basic physics tells us that a warmer atmosphere is able to hold more moisture—at a rate of approximately 7% increase per degree [Celsius] warming," as the UK Met Office's Hadley Centre explained in a 2014 report titled "Climate Risk: An Update on the Science." They add, "This is expected to lead to similar percentage increases in heavy rainfall, which has generally been borne out by models and observed changes in daily rainfall." On top of higher frequency, amount of rain has also increased (intensity). Some 70% more precipitation falls in the heaviest rain events now than it did in 1958. This occurs even as total annual precipitation drops (i.e. southwest where arid regions are getting more dry). Snowstorms: Cause: warmer atmosphere actually helps create more snow (as long as below freezing). Also similar to deluge, heat translates to more water vapor held in atmosphere. 1F → 4% more moisture in the atmosphere. Rain-snow line in central US. Less snowstorms but higher intensity as long as temp are still below freezing. Storm Surge: Cause: Rising sea levels is first contributor ( a storm surge is an abnormal rise in water, i.e. floods and tidal surges). Sandy: Additional water vapor due to higher surface temperatures (intense deluges) Warm water fuels hurricanes Sharp turn due to pressure ridge Was only a cat 1, compared to Katrina cat 4-5 Still probably won't see another sandy, but weaker ones will come more frequently The NOAA study has an "intermediate high scenario" of 2 to 4 feet of sea-level rise by 2100 and a "high scenario" where sea-level rises 4 to 7 feet by 2100. Hurricane surface temperature of 80F is the threshold for forming Hard to study if not in an airplane above it Tornadoes: Cause: weak link in research so far to climate change, but probably related to impacts on the jet streams. Vapor and blocking of currents lead to higher uncertainty.

Explain how to develop and apply scenario analysis, including the considerations for incorporating climate change into scenario analysis, analytical choices, tools and data, as well as the associated challenges and benefits.

Identifying and defining a range of scenarios, including a 2°C scenario, that provides a reasonable diversity of potential future climate states; Evaluate the potential resiliency of their strategic plans to the range of scenarios Using this assessment, identify options for increasing the organization's strategic and business resiliency to plausible climate-related risks and opportunities through adjustments to strategic and financial plans.

Explain how impacts and dependencies form part of a natural capital assessment.

Impacts (GHG, water us, pollution, land use, etc) are factored in as natural capital costs. Dependencies were less of a focus, but include mineral/energy extraction, flood protection, knowledge creation, and spiritual values. Also include positive natural capital impacts such as CCS. Seems mostly to be a cost analysis after valuations.

Describe the connections between a changing climate and the increased risks of health effects on humans.

Implications on physiological health: a rise in vector-borne diseases; heat-related morbidity and mortality; injury and illness from extreme weather events; increased cardiovascular disease and increased aeroallergens from poor air quality; and water and food security concerns from water and food-borne illnesses and malnutrition. Implications on psychological health: Heat, extreme weather, and VBD increases mood/behavioral disorders, depression, anxiety, PTSD. Vector-borne diseases that compound mental health issues with pre-existing mental health illness. separate direct and indirect causes, i.e. hurricane versus resource/crop loss At a community level effects of social strain and resource loss caused by drought/sea-level rise results in displacement, violence, and crime. However, on the flip side extreme weather events may also, in some cases, incite compassion, altruism, and trigger post-traumatic growth—wherein trauma may be met with personal strength, a sense of belonging, gratitude for existence, hope, and transformation (see Transition Town movement).

Identify the three main methods of modelling transition risk.

Macro ecnoomic-level (top down, assess impact of climate scenario through GDP, activity flows) Sector-level (top down, performance of sectors and transition sensitivities) Borrower-level (bottom up, this is hardest and with the weakest link to scenario data probably)

Describe how banks can take steps to evaluate climate risk in loan portfolios.

Initial quantitative assessments can be undertaken, drawing on published research and empirical evidence Scenario analysis Value Chain

Understand the drivers of climate change and explain the relationship between these drivers and the aforementioned cycles and systems.

Natural and anthropological substances and processes GHG Areosols Rapid adjustments Radiative Forcing Definition Measurement of the uptake of energy in the climate system - can be tied to concentration changes or to emissions directly (focus on the latter) Total Radiative Forcing is positive → leads to an uptake of energy by the climate system (increase in CO2 and other GHGs in atmosphere is the largest driver) Water cycle may have changed due to changes in moisture in the atmosphere as well as precipitation patterns over land.

Describe the six NGFS recommendations for central banks, supervisors, policymakers, and financial institutions to manage environmental and climate-related risks.

Integrate climate risks into financial stability monitoring and micro-supervision Mapping physical and transitional risk together Integrate sustainability factors into own-portfolio management This is already going to be pushed by central banks Bridging the data gaps Building awareness and intellectual capacity and encouraging technical assistance and knowledge sharing. Encourages collaboration within institutions and between stakeholders Achieve robust and internationally consistent climate and environment-related disclosure Should try and follow the international recommendations of the TCFD (chapter 13) on governance, strategy, risk management, and metrics/targets Supporting the development of a taxonomy of economic activities. develop a taxonomy that enhances the transparency around which economic activities (i) contribute to the transition to a green and low-carbon economy and (ii) are more exposed to climate and environment-related risks (both physical and transition).

Describe the main climate-related risks and opportunities that boards need to recognize.

Investment, Engagement, Policy Advocacy, Disclosure. Each come with opportunities to build off of each other and integrate into policy/governance/analysis.

Describe the current trends in the mitigation and adaptation sectors of global climate finance.

It's like 90% mitigation, 10% adaptation. Adapatation is all going to water/waste and disaster management, mitigation is going to RE and low carbon transport EVs.

Describe the different climate-related metrics and tools to assess the carbon footprint of a portfolio alignment with a less than 2°C scenario.

Metrics (examples listed in page 469): Carbon Footprinting (CO2/million dollars of revenue), Green/Brown exposure, Company engagement, Ratings/Research, Scenario analysis, Impact metrics, Adaptation metrics (preparedness).

Define and describe natural capital and natural capital risk.

Natural capital is 'the world's stocks of natural assets, which include geology, soil, air, water and all living things.' These assets provide numerous services critical to human well-being, such as climate regulation and food provision, but are becoming dangerously degraded by human activity. Natural capital risks: Natural capital costs are currently 'external' to businesses, but may increasingly become internalized in the future. The means by which costs could be internalized vary by sector and by natural capital type Nespresso, for example, were interested in understanding vulnerability in coffee supply chains due to climate change Cemento Argos, Hammerson, Robert McAlpine and PUMA all highlighted increased environ-mental regulation as the anticipated mode of internalization.

Assess the role of insurance as a risk mitigant for extreme climate and weather events.

On theme on insurance as a mitigant, Insurers observe that after natural disasters in Australia they see that typically, about one in 20 properties are not insured at all and upwards of 70% of proper-ties are inadequately insured.

Explain the core components of the Green Bond Principles.

Overview The GBP explicitly recognizes several broad categories of eligibility for Green Projects, which contribute to environmental objectives such as: climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation, and pollution prevention and control. Renewable energy (transmission, appliances and products) Energy efficiency (refurb buildings, energy storage, district heating, smart grids, appliances and products Pollution prevention and control ( mitigation focused on air, GHG control, soil, waste prevention and recycling) Sustainable use of nat res and land use (agriculture, crop protection and drip irrigation, aquaculture, forestry, restoration) Land and water biodiversity conservation Clean transportation (electric, hybrid, public, rail, multi-modal) Sustainable water and wastewater ( drinking water, urban drainage, flooding mitigation) Climate change adaption (information support systems, early warning systems) Circular economy (circular products, eco-label or environmental certified, efficient packaging and distribution) Green Buildings Use of Proceeds Focus on new bonds for clear environmental benefits, refinancing's should specify share of re-financing and look back period. Categories recognized below, though it seems like CBI and EU Taxonomies are getting more popular. Process for Project Evaluation and Selection ** Clearly communicate sustainability objectives, project fit, material environmental and social risks of project. Recommended external review here. On external reviews, this includes a second party opinion, verification of criteria, certification of proceeds (green bond label), green bond scoring/rating. Management of Proceeds: Proceeds credited to a sub-account tracked in formal internal process for Green Projects. Should discuss temporary placement of unallocated net proceeds when outstanding. Reporting Listed in annual report, or in material developments. Should contain feasible, quantitative performance measures, GHG accounting on reduced/avoided, etc. Stress on transparency, as usual.

Evaluate how transition scenario analysis can be used to assess opportunity and segment market attractiveness.

Similar to risk assessment, however "assessment of opportunities, like any strategy assessment, is more than a quantitative or statistical exercise; it needs to consider both qualitative and quantitative elements regarding future market and competitive landscape, as well as internal capabilities." Should identify attractiveness, bank capabilities/aligned strengths, and market strategies required by banks. Scenarios can help identify investment requirements by regions and sectors Think that chart that shows expected investments under 2 degree scenario

Describe the relationship between renewable energy and the SDGs.

RE ties into economic growth and reducing poverty, make agriculture more productive (food security), improves education and even gender equality, reduces indoor pollution which often affects women more. (ultimately links to 10 of 17 SDGs)

Describe how responsible investment approaches consider ESG issues with investment decision-making and ownership practices.

Recognition of the financial materiality of ESG issues for individual companies and the market as a whole. Acceptance that integrating these issues forms part of an investor's fiduciary duty to its clients and beneficiaries. Concerns about the impact of short-termism on company performance, investment returns and market behaviour. A desire to see companies owned and managed in a way that more holistically addresses long-term drivers of risk and return. Increasing public policy measures requiring investors to exercise their rights and responsibilities as owners, including expectations around voting and engagement. Pressure from competitors seeking to differentiate themselves via their approach to responsible investment

Discuss the economic knock-on effects within the Arctic (and the greater globe) due to the impacts of climate change.

Relocation of settlements impacting other cities Large-scale forest fires and outbreaks of tree-killing insects are characteristic of the boreal forest, are triggered by warm weather, and promote many important ecological processes (ACIA 2005) Also indirect global impacts from GHG emissions and jet stream volatility into extreme weather events. Called climate feedbacks. the global economic impact of the Arctic feedbacks could reach $67 trillion over the next three centuries under long-term miti-gation levels consistent with current national pledges (NDCs). This figure drops, respectively, to $34 and $25 trillion for the 2 °C and 1.5 °C target scenarios from the Paris Agreement,

Explain the definition and purpose of a social bond.

Social Bonds aid investors by promoting availability of information necessary to evaluate the positive impact of their Social Bond investments; and they assist underwriters by moving the market towards expected disclosures that will facilitate transactions. Social Projects directly aim to address or mitigate a specific social issue and/or seek to achieve positive social outcomes especially but not exclusively for a target population.

Identify health strategies to mitigate the effects of climate change on humans and the underlying rationale for the development of these frameworks.

Results from CCHVAA in US, UK, and Canada suggest that psychosocial impact assessments and monitoring programs ought to be implemented within assessments to provide standardized methods to measure and predict the psychosocial outcomes from a changing climate Next step is to identify indicators, datasets, and data analytic techniques and note key challenges/opportunities in incorporating these into the assessments.

Discuss the points to consider when reviewing analysis outcomes and the range of actions that investors may consider after a review.

Review Scale What is the order of magnitude of the potential impact? Timeframe What can I conclude about the possible times scales over which this will emerge? Asset classes and sectors What does my analysis tell me about the differential impact of climate change on different asset classes and/or sectors? Valuation Can I draw out lessons from the individual company's way I value or assets (quantitative or qualitative)? Trends and drivers What does the analysis tell me about the signals to watch for in order to track climate risks in specific asset classes, sectors or companies Actions Refine or Extend methodology Incorporate into risk and investment processes Company Engagement Stakeholder discussions and disclosure

Illustrate the range of available methodologies to assess any identified climate risks and opportunities.

Risks: Physical its Acute Chronic Transitional Policy/Legal Tech Markets Reputation risks Opportunities: Resource efficiency, Energy source Products and services Markets, and resilience

Assess the available methodologies for climate-related scenario analysis, including scenario design and physical and transition risk assessment.

Scenarios. Transition and physical risk scenarios used by different methodologies may converge or diverge on many underlying assumptions, such as population growth and degree of international cooperation; how-ever, for the purposes of this mapping, the focus lies on their temperature outcome. This is in line with the TCFD recommendations, which propose the explicit use of at least a 2°C scenario. Hazards (or shocks). Physical and transition risks can have several manifestations and methodologies do not always cover the full set of possible hazards. Physical risk from cli-mate change can take the form of acute or chronic hazards, while transition risk can arise from policy and technology changes (or shocks). Impact assessment methodologies. At the core of each methodology lies its impact assessment methodology. This component is the most important aspect in comparing methodologies for scenario-based analysis. This report uses the same scope-depth framework to distinguish between methodologies in the physical and transition risk sections of this section Outputs. Outputs of scenario-based risk assessments can be either qualitative or quantitative, or a combination of the two. Qualitative outputs most often take the form of risk ratings, which evaluate risk for each counterparty on a finite scale. Some methodologies producing quantitative outputs attempt to quantify financial risk to the counterparty to pro-duce a unique Value at Risk from climate change figure for each counterparty, while others examine average returns or borrower credit ratings. Resolution of analysis. Depending on their target audience, methodologies examine impacts on various counterparties, ranging from countries to individual corporate facilities.

Analyze the incentives for developed and developing countries to participate in clean energy development.

Schmidt [90] points out that reducing risks for RE investors pro-vides an attractive complement to increasing the relative profitability of RE Current barrier is just riskiness. Political risk can be reduced through public agencies such as the Multilateral Investment Guarantee Agency (MIGA). Public-private partnerships can reduce the governance related risks for the private investor. Policy de-risking is specified as regulatory reform, improvements in government accountability and effectiveness and international programs for good governance, anti-corruption and rule of law. Most of the projects will need to be funded by subsidized debt. That looks like soft/concessional loans from DB, or green bonds due to high demand.

Describe the global material sustainability issues that each SDG aims to address.

SDG1: South Asia and Sub-Saharan Africa majority of people living in extreme poverty SDG2: Globally, the proportion of undernourished people in the developing regions has fallen by almost half since 1990, from 23.3% in 1990-1992 to 12.9% in 2014-2016. However, one in nine people in the world today (795 million) are still undernourished. Lot of impact on children SDG3: focused on child health, maternal health (child birth issues), HIV/AIDS, SDG4: Enrolment in primary education in developing countries has reached 91%, but 57 million children remain out of school. More than half of children who have not enrolled in school live in sub-Saharan Africa. SDG5: In Southern Asia, only 74 girls were enrolled in primary school for every 100 boys in 1990. By 2012, the enrolment ratios were the same for girls and for boys. In 46 countries, women now hold more than 30% of seats in national parliament in at least one chamber. SDG6: In 2015, 91% of the global population is using an improved drinking water source, compared to 76% in 1990. However, 2.5 billion people lack access to basic sanitation services, such as toilets or latrines. SDG7: 1.3 billion people - one in five globally - still lack access to modern electricity. 3 billion people rely on wood, coal, charcoal or animal waste for cooking and heating. SDG8: Global unemployment increased from 170 million in 2007 to nearly 202 million in 2012, of which about 75 million are young women and men. Nearly 2.2 billion people live below the US$2 poverty line and poverty eradication is only possible through stable and well-paid jobs. SDG9: About 2.6 billion people in the developing world are facing difficulties in accessing electricity full time. 2.5 billion people worldwide lack access to basic sanitation and almost 800 million people lack access to water, many hundreds of millions of them in sub-Saharan Africa and South Asia. 1 to 1.5 million people do not have access to reliable phone service. SDG10: On average - and taking into account population size - income inequality increased by 11% in developing countries between 1990 and 2010. A significant majority of households in developing countries - more than 75% - are living today in societies where income is more unequally distributed than it was in the 1990s. SDG11: Half of humanity - 3.5 billion people - lives in cities today. By 2030, almost 60% of the world's population will live in urban areas. 828 million people live in slums today and the number keeps rising. Cities consume 80% of energy consumption, this can be optimized or dissipated. SDG12: 1.3 billion tonnes of food are wasted every year. If people worldwide switched to energy-efficient lightbulbs, the world would save US$120 billion annually. Gets harder as population grows. SDG13: The greenhouse gas emissions from human activities are driving climate change and continue to rise. They are now at their highest levels in history. Global emissions of carbon dioxide have increased by almost 50% since 1990. SDG14: Oceans cover three-quarters of the Earth's surface, contain 97% of the Earth's water, and represent 99% of the living space on the planet by volume. Globally, the market value of marine and coastal resources and industries is estimated at $3 trillion per year or about 5% of global GDP. SDG15: Thirteen million hectares of forests are being lost every year. Around 1.6 billion people depend on forests for their livelihood. This includes some 70 million indigenous people. Forests are home to more than 80% of all terrestrial species of animals, plants and insects. SDG16: The number of refugees of concern to the United Nations High Commissioner for Refugees (UNHCR) stood at 13 million in mid-2014, up from a year earlier. Corruption, bribery, theft and tax evasion cost some US $1.26 trillion for developing countries per year SDG17: Official development assistance (ODA) stood at approximately $135 billion in 2014. In 2014, 79% of imports from developing countries entered developed countries duty-free.

Explain the greenhouse effect

Solar radiation penetrates the Earth's atmosphere and warms the planet's surface. Heat radiating from the warmed planet is absorbed by gases in the atmosphere, which then reflects some of the heat back to Earth. Some naturally occurring atmospheric gases let visible light escape through into space while trapping certain types of infrared radiation. These greenhouse gases, including water, methane (CH4), and carbon dioxide (CO2), trap some of the reradiated heat, so they act as a partial blanket that helps keep the planet as much as 60°F warmer than it otherwise would be, which is ideal for us humans.

Identify the types of projects green bonds are used for in the global market.

Standard Green Use of Proceeds Bond A standard recourse-to-the-issuer debt obligation aligned with the GBP. Green Revenue Bond A non-recourse-to-the-issuer debt obligation aligned with the GBP in which the credit exposure in the bond is to the pledged cash flows of the revenue streams, fees, taxes etc., and whose use of proceeds go to related or unrelated Green Project(s). Green Project Bond: A project bond for a single or multiple Green Project(s) for which the investor has direct exposure to the risk of the project(s) with or without potential recourse to the issuer, and that is aligned with the GBP. Green Securitized Bond A bond collateralized by one or more specific Green Project(s), including but not limited to covered bonds, ABS, MBS, and other structures; and aligned with the GBP. The first source of repayment is generally the cash flows of the assets.

Identify the types of projects social bonds are used for in the global market.

Standard Social Use of Proceeds Bond A standard recourse-to-the-issuer debt obligation aligned with the SBP. Social Revenue Bond A non-recourse-to-the-issuer debt obligation aligned with the SBP in which the credit expo-sure in the bond is to the pledged cash flows of the revenue streams, fees, taxes etc., and whose use of proceeds go to related or unrelated Social Project(s). Social Project Bond A project bond for a single or multiple Social Project(s) for which the investor has direct exposure to the risk of the project(s) with or without potential recourse to the issuer, and that is aligned with the SBP. Social Securitized and Covered Bond A bond collateralized by one or more specific Social Project(s), including but not limited to covered bonds, ABS, MBS, and other structures; and aligned with the SBP. The first source of repayment is generally the cash flows of the assets. This type of bond covers, for example, covered bonds backed by social housing, hospitals, schools.

Describe the concept and causes of asset stranding.

Stranded assets due to environmental challenges, resource landscapes (abundance or scarcity), new regulation, falling clean tech costs, changing social normal, litigation. Transitions to low carbon operations and jumps in tech leave assets moot and unusable (financial detriment) Can it lead to financial instability (a systemic event), either through payment system disruptions, illiquid or insolvent firms, credit flow disruption, liability risks (mostly insurance), or asset value destruction? Risk is high if there is a sudden market correction on carbon-intensive sectors which financial institutions have too much exposure to. PRA identifies two tiers of financial asset that are risky (transitional), tier 1 securities that are impacted directly by regulatory limits to their ability to produce/use fossil fuels, and tier 2 securities from firms that are energy-intensive. UNEP identifies that systemic risk is unlikely, however you could have bottom-up contagion (cascading effect of mispriced assets onto other sectors), capital flight (significant capital outflows from areas impacted by natural catastrophes), and hazard globalization (macroeconomic impacts from changing global market/trade flows due to regulatory actions or supply chain disruptions (such as the wheat price doubling in 2010-2011). Stranded assets in the LAC are likely to affect: Upstream fossil fuel industry buyers within China and the Middle East, as well as government finances (reserve owners/exporters) such as Venezuela, Colombia, and Brazil (see producers Ecopetrol, Petrobras (salt reserves?), and Pemex). Databases: SITAWI a brazilian based ESG research provider. An IAM model from McGlad/Ekins (2015) showed that In Central and South America they estimated that 42 percent of oil, 56 percent of gas, and 73 percent of coal reserves would be 'unburnable' before 2050 in a scenario where there is not widespread CCS deployment (McGlade and Ekins 2015). This compares with 35 percent of oil, 52 percent of gas, and 88 percent of coal globally, suggesting that Central and South America has slightly more unburnable oil and gas reserves than the rest of the world and relatively less unburnable coal (McGlade and Ekins 2015). Agriculture and forestry is another key sector in LAC, and while countries like Australia were able to deal with yield/price fluctuations during Millennium drought, developing countries are more likely to be affected. In Nicaragua, 70% of total income of poor households comes from agriculture. They will be impacted by either stranded assets policies or just the climate change led destruction of farmable land. Suggests focus on transition of agriculture to biofuel production (Tucuman, Argentina did this) though this has competition/labor issues as well. Tourism to be affected by changes in erosion, snow cover or rapid glacial retreat. Caribbean island nations to be most heavily hit based on location and economic reliance, affected by ocean acidification, coral bleaching, sea level rise, etc. Human Capital/Knowledge growth to be impacted, and the productivity growth that usually comes with that. Large transitions can lead to a lot of labor conflict. Need more focus and research on green jobs, especially government enabled ones. Brazil made green jobs a focus on national development policy, such as their "My house, My life" program.

Describe the hybrid nature and definition of sustainability bonds.

Sustainability Bonds are bonds where the proceeds will be exclusively applied to financing or re-financing a combination of both Green and Social projects.

Describe the existing global approaches to defining "green" in the context of green finance.

The G20 Green Finance Study Group (2016) defines "green finance" as "financing of investments that provide environmental benefits in the broader context of environmentally sustainable development [...] Beyond the financing of green investments, green finance also involves efforts to internalize environmental externalities and adjust risk perceptions in order to boost environmentally friendly investments and reduce environmentally harmful ones [ . . . ]" Lack of specific definition for green hinders (or at least confuses) institutional investment and causes greenwashing.

Describe the impacts of human activity and fossil fuel development on climate patterns and variables.

The vast amount of overall human-caused warming—more than 90%—goes into heating the oceans, according to the latest cli-mate science. Water has a tremendous capacity to store heat. The atmosphere stores only approximately 1% of man-made warming because it has a relatively poor heat storage capacity. The Earth's surface stores only approximately 2% of global warming because the land also cannot store heat the way the oceans do. Amplifying feedbacks that worsen global warming, i.e. rising sea levels/melting ice caps and arid areas/fires

Assess the economic impacts, opportunities, and risks associated with a warming Arctic Region.

The large-scale physical changes that are underway in the Arctic are likely to lead to substantial investments into new infrastructure in the Arctic region, with the potential to generate multi-billion-dollar annual revenues over the coming years and decades +Will affect regional 'last chance' tourism, fishing (mackerel move north), gas and mining, agriculture (more growable land), as well as shorter shipping routes. that about 30% of the world's undiscovered gas and 13% of the world's undiscovered oil may be found there, mostly offshore under less than 500 meters of water". However pressure on prices may make this not worth it, as well as risk of oil spills - thawing leads to impacts on local coastal communities/infrastructure, more wildfires, and impact on human health (pollution from increased exploration and shipping).

Describe "reference scenarios" and how they are used in investment analysis.

The starting point for the analysis itself is to identify which scenarios, or future states of the world, will be used to provide a view of the potential implications of climate change on investments. Although there are commonly-used 'reference scenarios', by their nature, scenarios represent different visions of the future and none is right or wrong. The important action for investors is to understand the key assumptions that drive these climate scenarios, as these assumptions will have significant implications for the ultimate outcomes of their scenario analysis work. They can in their own right also inform investors' views on and understanding of the climate transition as a dynamic process over various timescales. A point to note here is that scenario analysis typically involves the selection of more than one scenario -in the words of the TCFD report, "a critical aspect of scenario analysis is the selection of a set of scenarios (not just one) that covers a reasonable variety of future outcomes, both favourable and unfavourable. The expectation of the TCFD is that at least one of the scenarios to be considered should be a "2°C or lower" scenario, where climate change is tackled in line with the Paris Agreement commitments.

Explain how scenarios are used for assessing transition risk.

To assess transition risk, the TCFD recommends banks to perform scenario analysis, which it defines as a "what-if" analysis of one potential state of the world under which a low-carbon transition could materialize. A scenario is therefore a plausible "hypothetical construct" of the future, not a precise forecast or a predictive model. Such analyses are useful for strategic decision-making and understanding the range of future transition-related impacts. The purpose of climate scenario analysis is to understand and disclose risks and inform decision making. Climate scenario analysis is at the heart of the Strategy element of the TCFD recommendations (see Figure 40.1). which aims to disclose "the actual and potential impacts of climate-related risks and opportunities where such information is material, ( .. ) on the organization's businesses, strategy, and financial planning by taking into consideration different climate-related scenarios, including a 2•c or lower scenario." A "2•C or lower scenario" lays out a trajectory • consistent with holding the increase in the global average temperature to 2•c above pre-industrial levels". The scenario analysis is expected to inform the "metrics and targets used to assess and manage climate-related risks and opportunities"

Describe the state of existing carbon sequestration technologies and the opportunities for the future development and deployment

Too hard to store underground, as 1% leakage makes it unusable. Something was tried in Germany by Verkent(?) but did not pass legislation. Research thus stalled, the goal was for 10% of CO2 to be captured and pumped into old gas/oil fields.

Identify the challenges in traditional CO2 benchmarking of credit portfolios.

Tough to figure out allocation of CO2 per $1 of debt or equity based on power, since equity can inflate and debtholders have more sway if highly leveraged. Becomes more complicated with seniority, public/private debt, revolvers, etc. Databases: BNEF new energy exposure rating estimates percent of organization value that is attributable to renewable energy and carbon markets. Also difficult to move fast or trade on CO2 reporting, which is annual and usually late. Therefore, there should be expectation of targets or projection pathways in the future High versus low beta (high credit risk/low credit risk, as beta is a baseline) will the first choice Next choice will be choosing a tenor of the yield curve. How to allocate emissions across 2 yr versus 30 yr? Lastly, most trading happens in CDS (think a little like interest rate swap?). Should we be able to arbitrage the CO2 exposure? Can we ascribe negative CO2 footprint to labeled green bonds, to cater towards a 'greening' of credit markets?

Explain the different objectives of scenario analysis.

Understand impact of climate change on overall solvency, ability to pay liabilities Incorporate climate change into selection of investments Asses risks/opportunities to financial performance of portfolios, sectors or individual assets Alignment to a 2°C or lower future

Describe the uses and limitations of IAMs.

Uses Couples detailed models of energy system technologies with simplified economic and climate science models to evaluate different population, economic and technological pathways, allowing an assessment of the feasibility of achieving specific climate change mitigation goal Limitations Limited when it comes to policy assumptions and implications and rapid technological development assumes gradual, compared to actual rapid advances in deployment of solar photovoltaics and the decreasing costs of renewable energy and energy storage doesn't take into account tipping points on energy or diet changes (i.e. EV or meatless) includes CCS (expensive and risky, chapter 3) and CDR (carbon in forests and also bioenergy, relatively new) Does not include avoided negative externalities, so cost of action is always more expensive than inaction

Explain how ERM principles and practices can be applied to manage ESG-related risks.

Using ERM as an approach: Decision-makers, Risk Managers, Sustainability Practitioners Purpose is to achieve enhanced resilience, common language for ESG, improved resource deployment, enhanced pursuit of ESG opportunities, efficiencies of scale (reduce redundant risks),improved disclosure. Page 481-483, covers governance (culture) strategy/context (term) performance (risk identification and prioritization and implementation) review reporting

Define greenhouse gases and describe their connection to human activity and energy use.

Water vapor, CH4, and CO2 cause a natural greenhouse effect, keeping the planet up to 60*F warmer than it would otherwise be. However, anthropologic climate change is being caused by continued emissions of CO2, CH4, N2O, and HFC/CFCs

Identify the six principles of responsible investment and potential ways to achieve them.

We will incorporate ESG issues into investment analysis and decision-making processes. develop tools/metrics/analysis We will be active owners and incorporate ESG issues into our ownership policies and practices. exercise voting rights, develop engagement capability We will seek appropriate disclosure on ESG issues by the entities in which we invest. ask for standardized reporting and integration with annual financial reports We will promote acceptance and implementation of the Principles within the investment industry Include Principles-related requirements in requests for proposals We will work together to enhance our effectiveness in implementing the Principles participate in networks and information plat-forms to share tools, pool resources, and make use of investor reporting as a source of learning. We will each report on our activities and progress towards implementing the Principles. heavy disclosure and transparency of integrations and activities (engagement, policies)

Describe and compare different carbon pricing methods.

With a tax, the government sets the tax rate and specifies the sources subject to the tax. The emission reduction achieved depends upon the response of the affected sources to the imposition of the tax. Note, the same emissions won't have a tax and ETS both applied. Auctions (for EU at least) are 40% free allocation and 60% auctioned, from ICE or EXX. Bidders pay a uniform price no matter what, some sectors are 100% auctioned (like power).

Identify the sources of climate finance and the financial instruments that drive investment in low carbon and climate-resilient projects.

can come from government budgets (national, bilateral, multilateral) or private (commericial finance, PE funds, institutional investors, corporate actors, and households). Most drives renewable energy, low-carbon transport, and energy efficiency.

Describe the relationship between sea-level rise and climate stabilization.

come back to this, but I think sea level rise impacts extreme events and also heat/salinity in certain areas. All this leads to climate destabalization

Assess the commonalities and contrasts between land-based, ocean-based, atmosphere-based, and space-based geoengineering efforts.

honestly both are focused on permanent changes in the geology of the Earth, with side effects that we don't know of yet and no reversability.

Describe investor interest in ESG-related risks.

in 2008, only one societal risk, pandemics, was reported in the top five risks in terms of impact for World Economic Forums. In 2018, four of the top five risks were environmental or societal, including extreme weather events, water crises, natural disasters, and failure of climate change mitigation and adaptation. In recent years, environmental and social proposals in the US have accounted for around half of all share-holder proposals submitted—representing the largest category of proposals (the other categories include board, anti-takeover/ strategic, compensation or routine/other). However, one-third of these proposals end up being withdrawn from proxy ballots and addressed through engagement or dialogue instead. Large institutional investor momentum, An EY survey revealed that more than 80% of institutional investors surveyed agreed that for too long, companies have failed to consider environmental and social risks and opportunities as core to their business

Analyze the mental health dynamics for various socioeconomic groups and the associated implications.

it all comes down to identifying availble resources by area by highest ranked climate risks and subsequent issues/mental stresses Use the various climate scenarios to figure out areas with high health vulnerabilities compared to health assessments. This is best applied on an individual level for now, as that's where empirical studies are. there are few recommendations in the literature on the timelines for monitoring mental health outcomes from climate hazards via emergency department visits, medical records, and syndromic surveillance. With the exception of heat waves—where the time frame to monitor emergency departments is directly linked to the duration of the heat wave—there are no clear timelines for monitoring medical records and emergency department visits when it comes to mental health outcomes related to climate-related extreme weather hazards or more chronic climate-related hazards (e.g., sea-level, melting permafrost, knowledge of climate change writ large). Case study by lead author Hayes: In this research, she investigates and maps the resources (programs, policies, support networks, services, etc.) available to support the long-term mental health and wellbeing of people in the town of High River, Alberta who experienced the 2013 super flood. Assessment was carried through on key resources before, during, and after climate-related extreme events.

Identify and describe the main contributors to sea-level rise

main contributor of sea level rise are thermal expansion, changes in groundwater storage, and ice loss from the following: Artic cap, Antarctica (specifically the west Antarctic sheet (WAIS) since most of it is underwater and more susceptible to warmer water), and the Greenland glaciers (Jakobshavn Galacier). If it completely melts, Greenland, by itself, would raise sea levels more than 20 feet.

Evaluate definitions of "green" for targeted and untargeted financing, including green bonds, green lending, green listed equity, green equity indices, and green themed funds

targeted refers to direct use of proceeds to green tech or activities, untargeted refers to specialist green companies or just green aligned. Banks and several national development finance institutions (such as AfD and KfW), have developed guidance regarding which projects fall under their definition of "green" similar to categories above. Institutional Investors are more focused on (ESG) performance overall, and move in line with SDGs. six stock exchanges with a dedicated green bond segment, or list. These are: The Oslo Stock Exchange, London Stock Exchange, the Stockholm Stock Exchange (i.e. Nasdaq Stockholm), the Mexico Stock Exchange, the Luxembourg Stock Exchange and the Italian Stock Exchange. Environmental and social focused, though many don't really align well. Funds are more dark green than light green aligned.

Explain how climate risk is a "transverse risk."

that is, not a risk in its own right but one that will manifest itself through existing risk channels. Firms can, therefore, use their current risk frameworks to begin to assess the impact of climate change. i.e. from physical and transition risks.

Assess the differences in funding between Development Finance Institutions (DFI) and climate-based funds.

tldr: DFI are focused on the actual funding of funds and risk guarantees, the funds themselves finance actual projects in private public partnerships (PPP). DFI World bank lends directly and manages funds for climate change mitigation (CIF, SCF, and recently CPF). Total of $42bn invested over four years. AfDB annual energy portfolio reached $2bn in funding for clean energy investments. This consists of a public vehicle (concessional for governments) and a private window for debt and equity. Also supports $625m annually in the CIF. Created SEFA (mini donor trust) with the Denmark and US governments ($60m annually). AfDB invests using either the GEF/GFA funds, or through risk guarantee products (PRGs and ADF, partial risk guarantees). Climate Funds Green Climate Fund (GCF) established in cancun agreement 2010. Before this, 15 different funds were already available for Africa. The funds are financed by DFI, multilateral donors (183 donor countries in the GEF), or bilateral donors. GEEREF financed as a PPP to provide equity to SMEs in RE. Currently, grants dominate the financing of RE projects in Africa by climate funds. 95% of the projects of the climate funds were funded with grants, 3% with loans and less that 1% with private equity. As you can see from this, annual funding for RE in Africa is very entangled. Of the approved amount 13% were disbursed and 46% were used for mitigation. The average cost of a project is $3.71 million and most approved projects receive less than $10 million.

Distinguish between the components of weather, climate, and their interrelationships.

weather: The weather is the set of atmospheric conditions you experience at a specific time and place. climate: The climate is the statistical average of these weather conditions over a long period of time, typically decades. climate affects weather events (or at least it will show up in projections)

Define global warming and explain its relationship to both the naturally occurring and human enhanced greenhouse effects.

At the dawn of the Industrial Revolution 250 years ago, CO2 levels in the atmosphere were approximately 280 parts per million (ppm). Since then, humankind has been pouring billions of tons of extra greenhouse gases into the atmosphere, causing more and more heat to be trapped. The main human-caused greenhouse gas is CO2, and the rate of growth of human-caused CO2 emissions has been accelerating. Emissions today are six times higher than they were in 1950. Moreover, CO2 levels have now hit 400 parts per million. As a result, the Earth has warmed 1.5°F (0.85°C) since 1900. Most of this warming, approximately 1°F, has occurred only since 1970.

Assess the attributions of, and correlations between, human influence on the environment and global climate change.

Atmosphere Ocean Water Cycle Snow & Ice Sea Level Climate Extremes

Describe the observed atmospheric, oceanic, carbon cycle, and biogeochemical cycle-based changes observed within the global climate system.

Atmosphere Temperatures are warming and have ever since the Industrial Revolution Global surface temperatures have risen Troposphere is virtually certain to be warming Low confidence in precipitation and other weather events Very likely that cold days/nights have decrease and while warm has increased along with heat waves & heavy precipitation events Ocean Virtually certain that the upper ocean (0-700m) has warmed Accounts for over 90% of energy accumulation More likely that salinity levels have increased as a result of more evaporation Cryosphere (The frozen water part of the Earth system) The Greenland and Antarctic ice sheets have been loosing mass at an exponential level Arctic sea ice and N. Hemisphere spring snow have decreased Permafrost temperatures are warming Permanent reduction of permafrost thickness Sea Level Sea level rise rate has increased since the 19th century Glacier mass loss and ocean thermal expansion explain about 75% of mean sea level rise Carbon Cycle & Other Biogenchemical Three Main Gases Carbon Dioxide Have increased by 40% since pre-industrial times Methane Nitrous Oxide Concentrations are at the highest in 800,000 555 GtC (gigatonne of carbon = 10^15 grams of carbon = 3.667 GtCO2) has been released into the environment from 1750-2011 Where is it ending up? Atmosphere has absorbs about 40% of emitted anthropogenic CO2, CH4, and N2O Ocean has absorbed about 30% The rest has been absorbed by terrestrial ecosystems

Describe the metrics and approaches that can support investors and asset managers in integrating climate risks and opportunities into their investment decisions.

Carbon footprint (tCO2e/mUSD invested, for investor portfolios Can be taken as a weighted average for the portfolio) Carbon intensity (tCO2e/mUSD revenue, for adjusting to company size). Green/brown share, for high-carbon sectors. Using data from GICS, ICB, or ISIC Green share can be calculated as avoided emissions, though it can be hard to calculate. Brown share is based off of sector trends Problem with this approach is that it doesn't go past sector classification to calculate exposure. Stranded asset risk, no simple metric yet VaR is an acceptable approach. ESG indicators or ratings, usually covering climate change policies, GHG reduction strategies, GHG reduction measures, scope 1 2 3 reporting, target setting.

Explain how transition and physical risk can affect firms and lead to financial risk

Changes can lead to a financial impact from: cost of emitting CO2 (carbon price), increased cost of production inputs, additional depreciation costs and R&D expenditures, changes in revenues o Physical risks § Direct effects: collateral value decrease, insurers pulling out of markets (climatewise paper covers this more) § Indirect Effects: floods in Thailand 2011 affect hard drive and car manufacturers, in turn affecting phone and electronic equipment manufacturers. o Transition Risks (independent variable is really speed): § Direct effects: stranded assets, especially on long term investments like coal-fired plants. § Indirect effects: cost of transport, raw materials, consumer costs.

Explain the climate-related changes in sector productivities and their impacts on default probabilities.

Changes in temperature, precipitation and related variables can affect productivity and output Ex: The temperature of water used to cool thermal power plants plays a critical role in determining how much power can be generated. Ex: Hydropower plants - changes in precipitation, evaporation and snow/glacier melt can all affect river flows, reservoir inflows and ultimately, power production. Less Productivity = Less Revenue generation %Delta in one is the same for other Change in productivity is considered, change in market price are not Ex: Agri already take it into account, and RUs can just pass it along to customer and recover via rate base Extreme Weather Domino Effect Downtime due to recovery = less productivity = less revenue Costs increase = more COGS = less profit Less revenue + less profit = higher chance of default

Explain how climate risks translate into credit risks.

Climate change effects a borrowers' capacity to generate enough income to service and repay its debt, as well as the capital and collateral that back the loan. Physical Risk Decreased production capacity (e.g. due to supply chain interruptions and worker absenteeism) Lower sales shocks and transport(e.g. due to demand difficulties) Increased operating costs (e.g. due to the need to source inputs from alternative more expensive supplies) Increased capital costs (e.g. due to damage to facilities) Can effect changes in valuation of assets and collateral Transition Risks Research and development expenditures in new and alternative technologies Costs to adopt and deploy new practices and processes Reduced demand for carbon-intensive products and services Increased production costs due to changing input prices (e.g. for energy and water) and output requirements (e.g. for carbon emissions and waste treatment) Can effect changes in valuation of assets and collateral

Explain the two distinct approaches that can be used to consolidate GHG emissions

Equity Share Approach Relies on either legal ownership share or economic interest (Sales) share, whichever is higher. (Total) Control Approach Based on financial or operational control, but can be finnicky when ownership doesn't imply control or vice versa. Equity = ownership; financial = economic interest Differences Differences in which is a better reflection of business activities, how it is monitored, costs, and completeness. For all, equity share is more accurate usually but harder and more costly. In the future, if GHG emissions becomes a liability on the balance sheet due to financial accounting standards, then we will have consolidation of joint operations approaches Special Cases Joint Ventures Possibility that it may get double counted Only applies if trading schemes or mandatory government reporting programs are in effect

Assess the achievements and shortcomings of the agreements

First treaty was too ambiguous, due to US pressure. Second one called on countries to participate on exact reductions in GHGs. George Bush was against modifying American lives, though Clinton supported stabilization at 1990 levels by 2000 in 1993.

Analyze climate change impacts on loan-to-value ratios using real estate methodology.

Extreme Weather events can reduce property value 5%-20% Values are highly location specific No exposure then no changes Data on future return periods for extreme events under 2°C and 4°C scenarios are converted into 'encounter probabilities'- Encounter Proababilites: the chances of properties experiencing extreme events over the average remaining mortgage term for the portfolio. Banks will calculate the average remaining terms specific to their retail and income-producing real estate (IPRE) portfolios. Encounter probabilities for each extreme event are then multiplied by the high-level estimates of changes in property values, and the results are aggregated, to calculate the 'risk to property value' for each climate scenario and time period, across all relevant extreme events. Finally, the original property values are adjusted by the 'risk to property value', to arrive at revised LTV ratios.

Compare the guiding principles, users, classifications, and screening criteria among the various green taxonomies.

Financial products users are portfolio management, UCITS funds, alternative investment funds, insurance-based Investment Products (IBIP), pension products and pension schemes. The Taxonomy (EU) has established two levels of classification while the Industry Catalogue and the Project Catalogue (both China) set three. At the lowest level of classification (i.e., economic activities/industries/projects), the three documents share similar granularity. Similar to the Taxonomy which sets specific metrics on economic activities, the Industry Catalogue and the Project Catalogue put in place national policies/standards as criteria for most of the industries/ projects.

Identify the financial and non-financial industries for which supplemental guidance was developed.

Financial sector Banks Insurance Asset managers Asset owners Mnemonic: ABIA Non-financial groups Energy Materials/buildings Transportation Agriculture Food Forest products Mnemonic: ME FFAT

Compare the two types of emission trading systems.

First form of ETS and most prevalent is a 'cap and trade' system, where a government aggregate limit is distributed by allocation rules and auction by 1 tCO2e. Not all is allocated at once in case of new market entrants In a cap and trade system, the government-established aggregate cap is usually a reduction from the recent emissions level or trend for the sources covered. In a baseline and credit system, the emissions limit for each participant can be absolute or based on production and an emissions intensity Second form and less common is a 'baseline and credit' system, where credits are given to emitters whose emissions are less than their limit.

Describe potential new approaches to development financing.

Funded by partnerships, focus on either data, technology, or financial impacts. I wrote an article on this: https://towardsdatascience.com/in-depth-analysis-of-un-sustainable-development-goals-progress-using-data-science-c39a208899e6

Describe the United Nations SDGs and their specific targets.

Goal 1. End poverty in all its forms everywhere Goal 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture Goal 3. Ensure healthy lives and promote well-being for all at all ages Goal 4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all Goal 5. Achieve gender equality and empower all women and girls Goal 6. Ensure availability and sustainable management of water and sanitation for all Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all Goal 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all Goal 9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation Goal 10. Reduce inequality within and among countries Goal 11. Make cities and human settlements inclusive, safe, resilient and sustainable Goal 12. Ensure sustainable consumption and production patterns Goal 13. Take urgent action to combat climate change and its impacts* Goal 14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss Goal 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels Goal 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development

Explain how climate change could be incorporated into the different aspects of risk management, such as risk identification, measurement, and monitoring

Governance Show approach that addresses overall business strategy and risk appetite Sufficiently long time horizon, with risk appetite showing factors such as long-term financial interests, scenario testing, uncertainty around timing, and sensitivity of balance sheet Risk Management Measure and manage through ICAAP and ORSA assessments on all material exposures relating to financial risks from climate change, and material exposures by business context. Metrics should include concentration of firms investment and lending portfolios, as well as physical risk factors on outstanding arrangements and supply chains. Metrics should include some sort of trigger level. Scenario Analysis: Used to explore resilience and vulnerabilities of firm's business model. Should reflect different transition paths, including a path where no transition occurs (8.5?). Split into a short- and longer-term assessment of exposure (5 versus 30 year analysis). Show use of these scenarios in actual management actions (tie actions to different scenarios) Disclosure of material risks: Pillar 3 CRR Solvency II

Identify the four core elements of climate-related financial disclosure and the recommended types of information that should be disclosed or considered for each.

Governance: Focus on how the board oversees climate related issues and their direct role Describe oversight: # of processes and frequency of information, consideration of climate related issues across all other decisions, how climate risk is monitored Describe role in assessing and managing: what climate related responsibilities have been assigned, description of organizational structure Strategy: Climate related impact assessment integration with businesses, strategy, and financial planning over short, medium, and long term. Describe risks and opportunities identified over short, medium, and long term: includes a description of the issues and material financial impact by geography and time horizon Describe risks and opportunities in business, strategy, and financial planning: Essentially breaking down into the value chain similar to PRB assimilation Take into account a 2 degree or lower scenario: ability to consider a transition to a lower-carbon economy based on relevant climate risks and how that may change. Risk Management: How climate-related risks are identified, assessed, managed, and communicated. Process for identification: proper policy and process documents, should consider emerging and existing regulatory requirements. Process for managing: mainly involves how they prioritize, mitigate, transfer, accept, or control those risks Process for integration: I think just how they fit into ERM framework? Metrics and Targets: Provide access to standard metrics and targets for investors and other stakeholders to assess Disclose the metrics used internally: provide metrics as well as how material ones impact remuneration (financial) policies. Historical periods are important for trend analysis. Disclose scope 1, 2, and 3 GHG emissions: reported in line with GHG protocol methodology, and generally accepted industry specific GHG efficiency ratios. emissions per unit of economic output (e.g., unit of production, number of employees, or value-added) is widely used. See chapter 15. Describe targets: Either usage targets, efficiency/financial goals, product life cycles, etc. Should reflect intensity of target, time frame, base year of progress measurement, and KPI to assess progress.

Describe how carbon taxes and emission trading systems contribute to economic efficiency.

In 2015, 17 emissions trading systems (ETSs) were operational in 55 jurisdictions while 18 jurisdictions collected a carbon tax Can be hard to independently determine effect of taxes or ETS, but generally have led to a decrease in emissions (ETS impact is inconclusive). Usually there are other policies or exclusions that change the design to be more practical, or hybrid of the two approaches for Carbon Pricing. Most tax rates are low relative to levels thought to be needed to achieve climate change objectives. Few jurisdictions regularly adjust their tax rates. First implemented in 1990. However, tax rates have been low and generally not adjusted, and future projections of tax changes are very uncertain and thus unreliable. One reason this is tough is because products often last decades, i.e. a vehicle for 10-20 years. Tax rate set either per tonne (of CO2 or tCO2e) or by the level required for a target based on economic modeling. Also set into the future taking into account inflation, tech change, fossil fuel prices, to help with pricing on investment decisions The studies find that the carbon taxes yielded only small reductions—up to 6.5% over several years Carbon taxes and GHG ETSs have become increasingly popular as policies to regulate GHG emissions and they now cover over 20% of global emissions.

Identify the key features and goals of the 2030 Agenda for Sustainable Development

It should support countries to invest in higher value added products and sectors, technology, a diversified economy and greater productivity, all of which should generate quality jobs and livelihoods (SDGs 7 to 15 highlight critical issues relating to such a transformation). Only then can countries meet the most pressing needs of their societies, including the eradication of extreme poverty (SDGs 1 to 6 reflect this social agenda and the human centered approach to development required to underpin and accelerate sustainable economic growth). Finally, for the first time, the 2030 Agenda acknowledges the quantum leap required in the capacities, collaboration and resources for such a transformation to occur (SDGs 16 and 17 speak to the means by which social contracts are strengthened within and among States).

Compare climate change policies and goals from pre-Paris Accords to those implemented in the Paris Agreement

Pre-Paris Agreement Goals Montreal Protocol of 1987 Successful example of international diplomacy around an environmental issue Used an initial smaller commitment for ozone depletion (affects UV ray filtering but not global warming) Meant to be revised That was supposed to happen for the UFCCC in Copenhagen but didn't. Kyoto Protocol of 1997 Set moderate targets Established legally binding emissions reduction targets (as well as penalties for noncompliance) for developed nations only Based on the premise that they were responsible for most of the earth's high levels of greenhouse gas emissions (Annex I [developed] v. Non-Annex I [non-developed]) Turned negotiations into a distributional conflict of mitigation burden re: top-down approach Static emissions reduction target instead of dynamic incentives to decarbonize the economy Free rider issue Post-Paris Agreement Goals Paris Agreement More flexible Requires that all countries (Annex I & Non-Annex I) do their part and slash greenhouse gas emissions No language is included on the commitments countries should make, nations can voluntarily set their emissions targets (NDCs), and countries incur no penalties for falling short of their proposed targets. Mandates the monitoring, reporting, and reassessing of individual and collective country targets over time in an effort to move the world closer to the broader objectives of the deal. Main Difference: Sets forth a requirement for countries (based on a bottom up approach) to announce their next round of NDC targets every five years but no legal liability as it is voluntary

Explain how the NGFS recommendations can guide the financial sector in achieving the objectives of the Paris Agreement.

Recommendations n°1 to 4 are aimed at inspiring central banks and supervisors - NGFS members and non-members - to take these best practices on board when it fits within their mandate. Parts of these recommendations may also be applicable to financial institutions. Recommendations n°5 and 6 do not fall directly within the remit of central banks and supervisors but point to actions that can be taken by policymakers to facilitate the work of central banks and supervisors. Parts of these recommendations may also be applicable to the private sector.

Identify and analyze the mechanisms in the Paris Accords to reduce emissions and promote sustainable development

Regular Review Brings to the forefront and commits to the creation of a long-term structure All Countries NDC provide a more realistic way of getting to the end goal Fair-burden sharing that gives flexibility to individual nations Not Legally Binding Allows nations to have chosen policies that reflect domestic rather than international priorities and circumstances

Describe the generally accepted GHG accounting and reporting principles:

Relevance Ensure the GHG inventory appropriately reflects the GHG emissions of the company and serves the decision-making needs of users - both internal and external to the company. Inventory boundaries chosen based upon control, on-site/off-site, nature of activities Completeness Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions. Dangers of setting a minimum emissions accounting threshold, since you can't set a threshold without quantifying and once it is quantified there's no point of a threshold Consistency Use consistent methodologies to allow for meaningful comparisons of emissions over time. Transparently document any changes to the data, inventory boundary, methods, or any other relevant factors in the time series. Like a machine learning model, has to be revisited and retuned over time since elements may have subtly changed (i.e. Volkswagen 1996 compared to now) Transparency Address all relevant issues in a factual and coherent manner, based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources used. Requires an audit trail, and justification of exclusions and inclusions. References for methodologies and data sources (just like a GMD) Accuracy Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable assurance as to the integrity of the reported information. Quantification process should be done in a way to minimize uncertainty.

Describe the necessary principles to follow for effective TCFD implementations

Represent relevant information Specific and complete Clear, balanced, and understandable Consistent (over time) Comparable Reliable, verifiable, and objective Timely (provided on a) Mnemonic: CRUST RC Consistent Relevant Understandable Specific Timely Reliable Comparable

Describe the opportunities for organizations that can arise from climate change.

Resource Efficiency: transport, production/distribution, recycling, LEED buildings, less consumption. Energy Source: low emission sources of energy, use of supportive policy incentives, new tech, carbon markets, decentralized energy generation Products and Services: R&D, product diversification Markets: new markets (green bonds), use of public sector incentives (using DFI public money to finance private projects) Resilience: energy efficiency and resource substitution/diversification (helps with product safety as well as supply chain reliability)

Describe how climate-related risks and opportunities can impact an organization's future financial position, as reflected in its income statement, cash flow statement, and balance sheet.

Risks can affect the three statements through: Revenues: transitional and physical risks may affect demand for products and services or pricing. Measures of sensitivity of demand for products/services Expenditures: costs of building climate change resilience and dealing with physical risks, transparency of plans may lower cost of capital. Assets and Liabilities: sudden changes in policies, technology, and market dynamics could affect the valuation of organizations balance sheet, especially on long-lived assets. Focus on carbon intensity, high physical asset life spans (land, equipment, facilities, reserves), low carbon competitors. For intangible, value of brand, copyrights, goodwill. Capital and Financing: May change the profile of debt and equity structure, either increasing debt load to compensate for reduced operating cash flow or R&D. Could end up with reduced tenor or asset write-downs (ABS).

Describe the definitional coverage of Scopes 1, 2, and 3, along with their respective roles in delineating emission sources in GHG accounting.

Scope 1: emissions from production owned or controlled by the company that are categorized as GHG in the Kyoto protocol. Others are not included but reported separately (part of Montreal Protocol?) Scope 2: emissions generated from purchased electricity consumed by the company Scope 3: extraction and production, transportation, use of products (i.e. rest of the supply chain) so 20t produced in factory (scope 1) bought by utility (1t Scope 2 19t Scope 3) and user (19t Scope 2 and 1t Scope 3)

Describe the approaches to manage the risk of stranded assets.

TCFD suggests policy options include building systemic capital buffers, regulatory loss absorbency requirements, capital surcharges based on carbon intensity of individual exposures, and large exposure limits to assets prone to risk. UNEP suggests environmental stress tests on financial markets/institutions. Also suggests green lines of financing (refinancing from green investments, liquidity operations with repos for low-carbon assets, balance sheet management with ESG considerations, QE/special asset purchases of green assets, enhanced transparency). Studies on Brazil central bank response to concerns on Amazon environmental risk post-2008 (UNEP 2014), Colombia central bank looking into social risks and eventually environmental risks. Examples/Movements: The Portfolio Decarbonization Coalition The Montreal Carbon Pledge Divest-Invest movement, supported by $3.4trillion in assets of institutions FTSE Environmental Markets Index Series, S&P Global Eco Index, MSCI Global Climate Index, MSCI Global Low Carbon Leader Indexes, MSCI ACWI Low Carbon Target Index Many indices still include oil and gas companies, not enough exposure to green technologies Engagement and Voting on resolutions targeting carbon companies (such as BP) is resource intensive, so mostly delegated to collaborative initiatives or industry associations such as National Association of Pension Funds, ShareAction, the Institutional Investors Group on Climate Change (UK) and Ceres (US). The Global Sustainable Investment Alliance (2014) found that the largest sustainable investment strategy globally is negative screening/exclusions ($14.4 trillion), followed by ESG integration ($12.9 trillion) and corporate engagement/ shareholder action ($7 trillion).

Describe the birth and evolution of climate accords in the late 20th and early 21st centuries

TLDR timeline: First came framing the problem and science, leadership articulated in COP1, things fall apart (cause US lul) by COP3 in Kyoto and kind of fixed in COP13 Bali 2007, leadership competition and financial crisis made COP15 Copenhagen 2009 a failure when it was expected to be great, then there was a lot of arguing between third world and developed countries about bearing the blame/costs. Hard cuts like 5% per country just did not work at all, actually saw better results from third world who initiated on their own (i.e. China). the Advisory Group on Greenhouse Gases was established in 1985 to identify key science policy issues, and a formalized Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 by the United Nations Environment Programme (UNEP) and the World Meteorological Organization. Environmental ministries and non-governmental organizations (NGOs) were beginning to be active. The Climate Action Network was established in March 1989 (as a coalition of many different environmental NGOs) and the International Council for Local Environmental Initiatives in 1990. Industry, on the other hand, was scarcely engaged in the issue at that time.

Explain the process for evaluating the financial impacts of carbon asset risks.

TLDR: screening, scenario making, then VaR models to get to metrics and outcomes. Up to bank to decide on portfolio level or company level risk analysis The operator/company approach applies scenarios to companies and their physical assets, testing the potential financial impact to assets as measured through valuation methods like discounted cash flow (NPV, IRR, Break-even price). At this level, governance structures, operational management, capital expenditure, and capital management impacts are all relevant. A top-down, portfolio-level approach is also possible for investors. Here, risk factors are identified from scenario analysis, as they are in a bottom-up approach, but these risk factors are then used to measure the overall portfolio exposure and, potentially, to optimize asset allocation depending on which scenario is believed to be most likely. This approach relies on industry standard models. First step is to screen down to only investments with highest potential exposure, since stress testing is resource intensive. Screening might be easiest with some sort of ESG score for starters. Consider corporate strategy, operational management approaches (CCS), development plans in relation to carbon risk factors, and investor engagement on carbon risk. Next step is to understand type and duration of financial relationship, i.e. type of financing, tenor/duration, and liquidity. Last step is baseline scenario data. Will need a macro-scenario data (expected evolution of risk factors), policy data, geographical variables. Consider how asset portfolio mix may change in the future Scenario making: Usually contains a current policies scenario (reference) as well as a new policies scenario (NPS, baseline now called stated or SPS) that takes into account policy and plans announced by countries, a 450 Scenario (considerably lower than 2 degrees), a 2DS (80% chance of limiting), Scenarios help form key inputs to forecasting commodity prices (which can then be used to stress test balance sheet), and also on company capital expenditure forecasts.

Describe the liability issues concerning the TCFD recommendations and assess the legal barriers to TCFD compliance.

The main concern from company directors is that due to uncertainty that affects ability to accurately disclose material concerns/implications, trying to do so may lead to other liabilities exposure such as misleading or securities fraud. Stress testing and scenario analysis: focus on assumptions about the future in scenarios, not certainty of future outcomes. ExxonMobil was investigated for alleged fraud after reporting climate risks are inherently uncertain, despite internal assessments producing scientific conclusions. Reporting obligations: In most G20 countries, companies already have legal obligations to disclose material risks including those that relate to climate change. UK considers a non-compliant sign off as a criminal offense. SEC can act when climate risk is material but company fails to report it. Disclosure laws: compliance with prevailing disclosure laws implicitly requires companies to make certain assumptions and forward-looking statements. There are legal carve-outs for forward looking statements made in good faith in the US and UK. Misleading or reckless cherry-picking is a liability offense/exposure. Good guide on scenarios from unep covering resources for DP, SOTP (DCF+EV/EBITDA), IAMs, physical risk hazard assessment, rating models, natural capital models.

Explain the concept of boundaries in operational GHG accounting (Scopes 1, 2, 3).

This step comes after organization boundaries have been set, remember this is part of the metrics and targets that were recommended by TCFD Direct GHG emissions are emissions from sources that are owned or controlled by the company. Indirect GHG emissions are emissions that are a consequence of the activities of the company but occur at sources owned or controlled by another company.

Identify the scope of coverage of the TCFD recommendations.

To Promote more informed investing, lending, and insurance underwriting decision For all organizations with public debt or equity In particular, asset manager and asset owners (public/private pensions, endowments and foundations) Findings should be provided in annual reports The Task Force chose a one billion USDE annual revenue threshold because it captures organizations responsible for over 90 percent of Scope 1 and 2 GHG emissions in the industries represented by the four non-financial groups (about 2,250 organizations out of roughly 15,000).

Identify and describe the physical and transition climate-related risks.

Transition risks: Policy/Legal: increased operating costs (compliance, insurance), write-offs and impairments, costs or demand lost from fines, new mandates, and litigations Technology: write-offs of assets, extra R&D expenditures, costs of deploying new practices and processes Market: increase in input/raw material prices, increase in output requirements (waste treatment), repricing of assets (reserves, land values, securities values) Reputation: reduced demand from stigma or shifts in consumer pref, difficulty attracting and retaining employees, less capital availability Physical risks: Acute: increased severity of extreme weather events leading to higher costs (health and safety, transport or supply chain interruptions, damage to assets/property) Chronic: rising sea level, temperatures, heat and rain patterns leading to higher operating costs (like nuclear cooling, damage to plants, insurance premiums)

Explain the core components of the Social Bond Principles.

Use of Proceeds Categories include, affordable basic infrastructure, access to essential services, affordable housing, employment generations in SME/microfinance, food security, socioeconomic advancement. Some target populations include poverty, marginalized populations, vulnerable groups (i.e. natural disasters), disabled, migrants, undereducated, underserved, unemployed. Process for Project Evaluation and Selection Clearly communicate social objectives, process, and eligibility of criteria. Like earlier, subject to external review. Management of Proceeds Clearly communicate social objectives, process, and eligibility of criteria. Like earlier, subject to external review. Reporting Voluntary guidelines aiming at a harmonized framework for impact reporting exist for Social Projects

Explain how compliance with the TCFD recommendations affects liability risk.

Where avoidance has led to more liability exposure: recent shareholder action in the Federal Court of Australia against Commonwealth Bank for its alleged failure to properly disclose climate risk silence, boilerplate disclosure, selective disclosure, framing climate risk as 'opinion or belief' are all risks Compliance helps prepare for regulatory pivot and also avoids sending a warning signal to the market, esp since direction of momentum is clear. For example, in May 2017, an ExxonMobil shareholders' resolution requiring the company to assess and disclose the financial risks and opportunities associated with climate change achieved two-thirds approval, even against management's recommendation. Eleven major banks representing more than $7tr in capital plan to become the first in the global financial sector to implement the TCFD recommendations. This includes ANZ, Barclays, Citi, Royal Bank of Canada, Santander and UBS.

Explain the various ESG-related risks that may impact an organization.

past examples of ESG related events that impacted share prices: JBS ultimately faced 31% loss in equity value from 2015-2017 allegations health and wellbeing, environmental impact, livelihoods (human rights), responsible business practices, wider sustainability topics (all from unilever framework)

Describe the current state of international climate finance flows.

see charts, but mostly private in the US, and even private/public split in rest of the world. Most of it comes from National, Multilateral, Corporate, and Households, and goes to mitigation (RE and transport)