A Re-Evaluation of the Financial Risks of the Net Zero Transition

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Summary

This paper examines the potential impact of climate change on financial risk and the uncertainty surrounding the outcomes of different mitigation scenarios. We use a consistent climate stress test model to evaluate the effect of three possible net zero scenarios on companies’ valuations and financial investments. We find that the impact of the transition to net zero emissions could vary greatly for the same target (below 2°C) based on how the transition may unfold.