DescriptionPolicy makers and financial regulators are increasingly concerned about the impact of climate physical and transition risks on economic growth and financial stability. The introduction of timely and coherent climate policies, and sustainable finance instruments were recently advocated to mitigate such risks. However, their design and implementation are still unclear, and so are the potential and adaptive responses of the real economy and financial markets. Contributing to fill this gap, we further develop the EIRIN Stock-Flow Consistent behavioural model to assess how investors could react to the impact of stochastic climate-led disasters, as well as to the introduction of a carbon tax and green subsidies to address climate risks, accounting for their expectations on climate risks. Then, we analyse under which conditions investors’ climate sentiments play out and the implications for investments’ decarbonization. Our results show that investors’ climate sentiments could be a game changer in influencing portfolios’ reallocation toward green assets, thus amplifying climate policies’ impacts. Thus, the design and implementation of climate policies are crucial to foster a low-carbon transition while preventing strong distributive effects across households. Our results contribute to the discussion on what role could green fiscal, monetary policies and financial regulation play in the sustainability agenda.
|Period||6 Sept 2018 → 8 Sept 2018|
|Event title||EAEPE Annual conference, Nice|
|Degree of Recognition||International|