Finance Between Stability and Sustainability
Second FINEXUS Conference on Financial Networks and Sustainability
Date & Venue: 22-23 January 2018, University of Zurich, Aula KOL-G-201, Zurich, Switzerland
Aim and scope. While sustainability and climate action have taken center stage in the media and the policy discussions, the majority of financial capital remains allocated today into economic activities that are misaligned with the objectives of the UN Sustainable Development Goals (SDG) and the Paris Agreement’s 2C target. This fundamental problem is not receiving enough attention by scholars and practitioners. In order to bridge this gap, it is necessary to develop and mainstream suitable metrics to assess the risk and the impact of investments against those objectives.
At the same time, a financial system aligned with sustainability needs to be aligned, in the very first place, with financial stability objectives. Remarkably, the financial crisis of 2008 has exposed the critical weaknesses arising when interconnectedness and complexity in the financial system go too far. Ten years after, several scholars and regulators warn that these weaknesses have been patched but not addressed at their root.
Common to the gaps both in sustainability and financial stability is the tension between individual incentives and policy objectives at the system level. In this respect, the discipline of financial networks, which analyses the structure of financial interdependencies among economic actors, offers new insights on how to measure and smoothen this tension. Fields of applications of financial network-based tools range today from the stability of interbank derivative markets to the alignment of development banks’ portfolio to climate adaptation objectives.
The first day of the conference revolves around practitioner sessions to discuss success stories as well as challenges faced by the financial industry and by policy makers, and how the insights from research can help. The second day is devoted to the result of recent and on-going research by international leading scholars in the field.
Preliminary agenda for the practitioner sessions (Monday, January 22, 2018) – More updates soon.
The conference is comprised of four practitioner panel sessions on Monday January 22 focusing on the following industry and stakeholder groups: insurance (session 1), pension funds and asset managers (session 2), development banks and central banks (session 3), fintech (session 4). The day of Tuesday January 23 comprises four academic sessions devoted to the presentation of research results from the DOLFINS project (www.dolfinsproject.eu).
Session 1: Got that covered?
The insurance sector has been on the forefront of incorporating climate physical risk from climate change in their models. How to model climate policy risk? This session aims at discussing the state of the art of the practice and expectation of the stakeholders from policy academia.
Session 2: Act or divest?
Some asset managers and pension funds have been recently demanding better disclosure of climate risk and decarbonization plans from the fossil fuel companies in which they hold shares. This session discusses the incentives and the barriers for investors in pushing for better disclosure of climate related financial information.
Session 3: Getting green-bond-stock-and-barrel into sustainable finance?
Green bonds, initially introduced by the European Investment Bank, are becoming an increasingly mainstream instrument of investment, yet their market share is still below its potential. The session discusses the role of both development banks and central banks in the success of green bonds and other sustainable finance instruments, as well as the challenges ahead in this area.
Session 4: #Fintech4Greentech?
Fintechs have the potential to increase the funding opportunities for innovative SMEs in the green sector, which the traditional banking sector is not prepared to invest in. This session discusses recent examples of successful applications in the field along with emerging issues that remain to be addressed regarding governance, confidentiality, traceability, etc.
Session 5: Public Round Table
This session hosts four world-renowned experts from academia and the industry to discuss the barriers identified in the practitioner sessions, and involve the broader audience in a discussion on the solutions ahead on how to ensure financial stability while promoting sustainable finance.
The conference is supported by the EU project DOLFINS (grant no. 640772) coordinated by Prof. Battiston (University of Zurich), as well as by the Institute for New Economic Thinking (Research Program on Financial Stability, directed by Prof. Joseph Stiglitz, Columbia University).
1 The Climate Stress-test methodology (see Battiston ea. 2017) allows individual financial institutions to include climate policy risk in their decision-making process through standard metrics such as Value-at-Risk. Other recently developed metrics include an index that captures the impact of a portfolio in terms of GHG emissions (Monasterolo and Battiston, 2017), as well as indices to assess the contribution of development banks’ project to climate adaptation (Monasterolo et al. 2017). Other metrics have been developed by 2-degrees-investing and CDP (Carbon Disclosure Project).