Measuring Climate Risks with Indirect Emissions

Abstract

Climate change poses completely new challenges for the financial markets, and thus the consideration of green aspects is becoming explicitly required by regulators and investors. Most of the reports which influence the market in this way evaluate the climate or environmental impact of a product or process based on their alignment with a regulatory standard. However, the methods applied for measurement do not always provide a proper description of the relationship between the investments and the natural resources. Most analyses evaluate investments related to economic sectors based exclusively on direct emissions, while indirect impacts, which represent a substantial part of total emissions, are not taken into account. In the study, the methods and results which are currently applied are compared to calculations including indirect impacts as well.