University Finance: Risk Management Analysis and Financial Economics

This report analyzes an article on risk management, focusing on the impact of new carbon emission policies and climate risk within the financial sector. The analysis considers the importance of stabilizing global temperatures to mitigate environmental impacts and the opportunities and risks associated with achieving net-zero carbon emissions. It highlights the complex nature of climate-related financial risk, the role of financial institutions like the Bank of England in managing these risks, and the development of tools for risk management. The report discusses the macroeconomic consequences of climate change scenarios, the effects of economic shifts towards net-zero emissions, and the importance of accelerating adjustments to this transition. The report uses the lens of financial economics to interpret the article, providing insights into the principles of risk management and financial strategies in the context of climate change.

Running head: RISK MANAGEMENT
Risk Management
Name of the Student
Name of the University
Author’s Note

1RISK MANAGEMENT
The article that has been chosen mainly focuses on the impact of the new carbon
emission policies for the climate risk. It is necessary to stabilize the global risk in the
temperatures which might affect the overall environment of the world. Achieving the net zero
carbon emission is associated with the creation of enormous opportunities along with major
risks. The climate related financial risk is mainly complex and challenging, which lead to COP26
climate negotiation. The financial sector mainly plays an important role which points out the risk
along with developing the tools. These tools would be helpful for managing the risk that might
on the way of the risk management. It can be seen that the Bank of England represents around £
11tn of assets that starts to include with climate risk and other risk in the financial areas1.
Improving the measurement along with managing the climate risk has been focused by the BoE.
The new framework for testing the stress level are associated with the largest banks of UK along
with the insurers for climate risk. Further climatic action is to be taken which points out the early
policy and delivers the orderly transition for better management. The macroeconomic
consequences of the scenarios puts the physical impact on the change of the climate along with
meeting the requirement of the borrowers. Changes in the economic shift to net zero is also
exercised by the risk management techniques. Moreover, speeding up the adjustment to the net
zero carbon emission is also helpful for the economy.
1 Mark Carney, 2019. The financial sector can amplify the positive impact of new carbon
emissions policies.

2RISK MANAGEMENT
Bibliography
Schoenmaker, D. and Van Tilburg, R., 2016. What role for financial supervisors in addressing
environmental risks?. Comparative Economic Studies, 58(3), pp.317-334.
Doda, B., Gennaioli, C., Gouldson, A., Grover, D. and Sullivan, R., 2016. Are corporate carbon
management practices reducing corporate carbon emissions?. Corporate Social Responsibility
and Environmental Management, 23(5), pp.257-270.