Abstract
A literature is rapidly developing on financial shocks originating from ecological imbalances. These shocks can be triggered by either intensified environmental policies, clean tech breakthroughs or due to the economic costs of crossing ecological boundaries. However, financial supervisors have so far given little attention to this ecological dimension. This allows systemic financial imbalances resulting from ecological pressures to build up and concentrate in financial institutions and markets. This paper sketches the ecological dimension of the prudential policy framework and illustrates the working for the case of carbon emissions.
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Notes
KPMG (2012) converts 22 environmental impacts into financial value, drawing upon current environmental-economic research. They include greenhouse gases, water abstraction and waste generation. The physical totals of these inputs and outputs are converted into financial values and aggregated to achieve a total environmental cost value. The study is based on the operations of over 800 companies representing 11 sectors.
In 2006, the International Organization for Standardization (ISO) adopted the Corporate Standard as the basis for its ISO 14064-I: Specification with Guidance at the Organization Level for Quantification and Reporting of Greenhouse Gas Emissions and Removals (see www.ghgprotocol.org/about-ghgp).
Article 173 of the French Law on the Energy Transition for Green Growth.
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Acknowledgements
The authors thank Daniel Gros, Lex Hoogduin, Clemens Kool, Christian Kopf, Evan Kraft, Arjen Siegmann, Peter Wierts, Simon Zadek, the members of the Sustainable Finance Lab, and the editor, Paul Wachtel, for stimulating discussions and useful suggestions. This paper was presented at the Design Options for a Sustainable Financial System conference organized by the Centre for International Governance Innovation and the UNEP Enquiry into the Design of a Sustainable Financial System, 1–3 December 2014, Waterloo, Canada, and at the Twenty-First Dubrovnik Economic Conference, 7–9 June 2015, Dubrovnik, Croatia.
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Schoenmaker, D., Van Tilburg, R. What Role for Financial Supervisors in Addressing Environmental Risks?. Comp Econ Stud 58, 317–334 (2016). https://doi.org/10.1057/ces.2016.11
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DOI: https://doi.org/10.1057/ces.2016.11