Climate alpha and the global capital market

Alexander Golub, Jon Anda, Anil Markandya, Michael Brody, Aldin Celovic and Angele Kedaitiene
Additional contact information
Alexander Golub: American University and Climate Equity Research
Jon Anda: Climate Equity Research
Michael Brody: George Mason University
Aldin Celovic: SA Consulting GmbH
Angele Kedaitiene: Lithuanian Environment Agency

No 2022.19, Working Papers from Fondazione Eni Enrico Mattei

Abstract: The way in which climate policy and climate risks are currently accounted for in financial and real investment decisions is inadequate. The paper demonstrates weaknesses in methods presently used and proposes an alternative that aims to bridge the duration gap between climate policy modeling and mitigation capital. The core tool is real options analysis combined with an Integrated Assessment Framework designed to capture the complex set of issues linking climate change, climate policy and the economy. The tools are meant for use in both capex decisions by corporations and portfolio decisions by investors. The tools will be a hedge against the risk of mitigation short squeeze occurring because investment is deferred beyond the 5 year or less timeframe of finance.

Keywords: Climate alpha; option value; abatement short squeeze; green transition (search for similar items in EconPapers)
JEL-codes: G11 G17 G18 Q54 (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-ene and nep-env
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Working Paper: Climate alpha and the global capital market (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2022.19

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