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Speaker
Luca Taschini is an economist and his research is interdisciplinary and spans economics and applied finance. It cuts across the fields of environmental and resource economics, financial economics and industrial organisation.
Luca Taschini is Professor of Climate Change Finance at the University of Edinburgh Business School and a Visiting Senior Fellow at the Grantham Research Institute at LSE. Luca is a CESifo Research Network Fellow, and he was previously a Visiting Scholar at MIT and the Ritsumeikan University, Japan.
Title
Carbon Default Swap – Disentangling the Exposure to Carbon Risk Through CDS
Abstract
Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms’ credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises where and which sectors are better positioned for a transition to a low-carbon economy. Moreover, lenders demand more credit protection for those borrowers perceived to be more exposed to carbon risk when market-wide concern about climate change risk is el- evated. Finally, lenders expect that adjustments in carbon regulations in Europe will cause relatively larger policy-related costs in the near future.
To consult the paper it is here
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