Nobel Laureate Prof. Robert Engle, Co-Director of the NYU Stern Volatility and Risk Institute, explains in this CFA Institute APAC Regional Webinarwhy climate risk could easily be the next biggest risk that humanity faces after the COVID-19 and the financial crisis induced by the pandemic.
Climate change is a very long horizon risk. The worst impacts are far in the future and yet they affect behavior and asset prices today. The class will discuss the science and the economics of climate change. Common economic examples of externalities and regulation will be used to frame the analysis. From this point of view, portfolio choices and asset prices will be examined. The short run and long run costs of divesting fossil fuel stocks will be considered.