Heat Shocks & Farm Size
In developing countries, many households, even those where adults work in non-agricultural sectors, depend on small farms for food and income. These farms operate at a lower rate of productivity, unable to benefit from economies of scale. Typically, these households are uninsured against negative income shocks. What happens, then, when weather shocks occur, such as heat waves or drought? Economic researchers recently studied the link between small farms and income shocks in Colombia, a country of 52 million, with one-tenth the land size of the U.S. “We found that temperature shocks increased the number of land sales and mortgages, with […]
Supply Chains & Climate Risk
Supply chain disruptions during the pandemic made average citizens aware of how vulnerable supply chains are, and how severe the knock-on effects can be. Supply chains continue to be exposed to risk in many ways: geopolitics, labour, and weather, to name a few. In this month alone, floods and atmospheric rivers have caused major disruption of supply chains, such as can be seen in the December flooding in British Columbia’s Fraser Valley and Washington state. As companies continue to manage supply chains in the face of climate change, what are the trade-offs between cost minimization and resilience? What are the […]
U.S. Climate Politics
Climate change is recognized as having large effects on health and economic well-being. Peer-reviewed scientific studies show the impact of temperature/weather/pollution on mortality, GDP, health, crime, and civil conflict. Yet, according to a recent working paper series by Burke et al., adaptation to counteract the problem has been muted. “The climate change response has stalled. Are democracies equipped to handle this problem? asked Francesco Trebbi, Professor of Political Economics at the University of California, Berkeley School of Business. “Policies to curb the climate crisis, such as the carbon tax, are often democratically opposed. Are non-democracies like China better able to deal […]
Fostering Clean Growth
To address environmental concerns, many governments impose pollution regulations on companies or firms. A key goal of such regulations is to spur the development of innovative clean technologies. Empirical evidence suggests that such strategies do, in fact, work. But how effective are regional regulations when dealing with multinational corporations in a globalized economy? “Environmental policies are often confined to local jurisdictions, whereas industrial production operates on a global scale. This mismatch poses a challenge for policymakers,” said Wei Xiang, Assistant Professor of Economics at the University of Michigan. “Firms, especially multinationals, can move their pollution-intensive operations to foreign jurisdictions. This […]
Credible Scenarios
What are the best practices for environmental and climate risk management in the financial sector? Are the standard input scenarios actually suitable for financial modeling? Economic scenarios are an essential tool in assessing the financial risks of the ever-changing world. Given that the average global temperature is increasing, and storms are becoming more severe, year over year, those who construct financial models of risk must set up new, realistic scenarios. Estimating gains and losses on portfolios is difficult because of the deep uncertainty of climate impacts, but modelers must start somewhere. “Using relevant scenarios is crucial,” said Irene Monasterolo, Professor […]
Adapting Agricultural Trade
Climate change affects, and will continue to affect, agricultural productivity around the world. It is one of the inescapable ironies of our times that sub-Saharan Africa will be severely affected by climate change, despite how little it has contributed to global carbon emissions. How severe will these effects be? And is there any way to mitigate the effect on the most susceptible nations, besides curbing emissions, which appears to be a losing strategy? “Agriculture is a vulnerable sector because it is fed by rain and it is near the limits of thermal tolerance to begin with,” said Obie Porteous, Associate […]
A Storied Career
How is asset management evolving? What forces are re-shaping the financial industry? And what lessons were learned over the career path of one financial wizard? On June 23, 2025, the CFA Institute released the video of a far-reaching interview with Kenneth Blay, Head of Research, Global Thought Leadership at investment management company Invesco. “I started ‘in the dregs’ as a stockbroker,” Blay reminisced, “cold calling and pitching stocks before moving into research.” He noticed he was giving different recommendations for portfolios than his colleagues were, and he wondered why that wasn’t explored more systematically. Later, with Nobel laureate Harry Markowitz, Blay did […]
Plugging into Progress
Many countries signed on to the 2016 Paris Agreement, but nine years later, how many are actively working toward decarbonization? Watchdog organizations are evaluating the progress made year over year and will encourage the 195 or so signing parties to keep the commitments they made. One such organization is the independent scientific project Climate Action Tracker (CAT), whose main graphic summarizes the goals. On May 21, 2025, the Climate Action Tracker group presented a webinar, “Plugging Into Progress: Evaluating Power Sector Decarbonization,” in which four experts on climate risk discussed the progress, or lack thereof. Louise Jeffrey began the session. […]
The Growing Protection Gap
According to a CoreLogic survey, roughly 35 million homes, or nearly a third of the nation’s housing stock, are at “high risk” of a natural disaster. How much are U.S. households willing to pay for insurance? Will this give adequate coverage? And what do changes in demand imply for the future of insurance markets? “Climate losses are increasing, with homeowners insurance premiums rising in tandem,” said Pari Sastry, Assistant Professor of Finance at Columbia Business School, “and there is widespread concern that rising premiums are making insurance unaffordable.” Parinitha Sastry was speaking at a webinar on May 15, 2025, presenting […]
What is the Cost of Biodiversity?
Biologists have long known that biodiversity is the key to nature’s resilience. In a biodiverse world, if the environment changes and some organisms can no longer thrive, others can take their place and fulfil functions that are essential to the species’ survival, and ultimately, human survival. Even the lowliest animals play significant roles, such as insects that pollinate—and a third of the food we eat depends crucially on insect pollinators. In addition to its intrinsic value, biodiversity underpins ecosystem services, providing the backbone of the global economy. Biodiversity loss, or the reduction in the genetic diversity of life forms, can […]