2nd FINEXUS Conference on Financial Networks and Sustainability

Closing the Gaps Between Finance and Sustainability

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Date & Venue: 17,18,19 January 2018, University of Zurich, Aula KOL-G-201, Zurich, Switzerland

Registration: free but required, open until 3rd January 2018. REGISTRATION FORM

Short research presentations: submission is open until December 18th (optional)

Sustainable business corner @FINEXUS: submissions are open until December 18th to pitch your start-up or to showcase your business in sustainable finance during the conference (optional)

Aim and scope. Reconciling sustainability and finance requires narrowing the current gaps between analytical methods, financial instruments and governance processes. Following the success of our 2017 academia-focused conference, Ue now expand the discussion in the FINEXUS 2018 Conference to include policy makers and industry professionals.

This three-day conference (January 17-19, 2018) bridges academic research, industry and policy expertise. Practitioner sessions present success stories from leading experts and discuss how the insights from research could help to address the challenges faced by the financial industry and by policy makers. Research sessions report the latest findings from leading scholars in the field and discuss the future avenues of research.

The Key Panel Session on Thursday January 18, 2018 gathers on stage some of the most influential experts to discuss the progress made so far by the public and the private sector towards sustainability and financial stability, and to examine the challenges ahead in terms of methods, financial instruments and governance processes. Speakers include: Prof. Joseph Stiglitz (Columbia University), Mr. Graeme Maxton(Secretary General of Club of Rome), Ms. Mafalda Duarte (Head of Climate Investment Funds), Mr. Christopher Steane (Global Head of Lending Services at ING), Mr. Urban Angehrn (Group Chief Investment Officer and Member of the Executive Committee at Zurich Insurance Group).

This is an invitation-only event. In order to secure your seat, please register here (http://goo.gl/65dgy2) by January 3, 2018. We welcome contributions for short presentations to the research sessions. The final program is available on the same page.

Research and policy context. 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. At the same time, for the financial system to be aligned with sustainability objectives it has 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.

On the one hand, addressing these gaps requires to enhance standard financial metrics to encompass sources of risk currently not considered, such as climate risk. It also requires to go beyond the standard finance approach to risk-return by introducing metrics of impact in order to assess the contribution of portfolios to sustainability and stability objectives. Moreover, given the interconnectedness of today’s business, these enhanced metrics of risk and impact need to be based on network models of both investment chains and supply chains. On the other hand, in light of the lessons learnt from the financial crisis, the development of new financial instruments and the governance processes needed to move towards sustainable finance can greatly benefit from models of endogenous networks of strategic economic players.

Indeed, 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 novel and valuable insights on how to measure and smoothen this tension. Fields of applications of financial network-based tools range today from the analysis of the financial stability of derivative markets to the integration of climate risk into standard stress-test methods for individual financial institutions.

While traditional economic approaches to Climate-Finance have the clear merit to cast fundamental questions about climate risk and climate-policy risk in the context of economic incentives analysis, they tend to give too little attention to aspects such as information asymmetries, market power and regulatory capture. Furthermore, the financial system is regarded as an aggregate sector where the interactions among financial institutions are neglected and money is essentially irrelevant. With the ultimate goal to provide insights into the political feasibility of policies, the complexity approach to climate risk aims to provide a complementary framework in which some of the classic assumptions are relaxed. It becomes then possible, to assess risks and benefits at the micro-economic level of individual financial institutions, in particular for those that have either systemic relevance such as large banks, or welfare implications for ordinary citizens, such as pension funds.

EU Research DOLFINS. This year’s edition of the conference coincides with the final conference of the EU funded DOLFINS project, which has been delivering insights rooted on complementary economics approaches, including financial network models and stock-flow consistent agent-based models. DOLFINS has developed innovative metrics to integrate into traditional notions of risk some crucial aspects of sustainable finance, such as the systemic risk resulting from financial interconnectedness. DOLFINS has also developed a climate stress-test methodology that allows to assess individual institutions’ exposures to transition risk from climate policies. Finally, DOLFINS has developed models that allow to make an assessment of the future impact of monetary and fiscal policies in terms of investments in the green sector and in terms of inequality.

Institute of New Economic Thinking. The conference is also supported by the Institute of New Economic Thinking through its Task Force on Financial Stability directed by Prof. Joseph Stiglitz (Columbia Univ.)

Program Committee. Stefano Battiston (UZH), Marc Chesney(UZH), Pablo Medina Koch (UZH), Alexander Barkawi (CEP), Irene Monasterolo (Vienna University of Economics and Business), Katharina Serafimova (Resilience).

Acknowledgements. 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).


Program

The conference is comprised of several practitioner panel sessions on Thursday 18 and Friday 19 focusing on the following industry and stakeholder groups: asset managers (session 1), pension funds (session 2), development banks (session 3), central banks (sessions 4 and 5). Included are also four research sessions, three research and practice sessions, and one policy and research session.

Wednesday, 17th January

08:30-09:00 Welcome to the conference and introduction to the DOLFINS project. Stefano Battiston (UZH)

09:30-10:00 Keynote Session. Carlo Jaeger (GCF)

10:00-10:30 Coffee Break

10:30-12:30 Research Session 1: Climate change and economic policy modeling. While traditional economic approaches to Climate-Finance have the clear merit to cast fundamental questions about climate risk in the context of economic incentives analysis, they tend to give too little attention to crucial aspects such as information asymmetries, heterogeneity, interaction and feedback loops which are needed to explain the amplification of shocks and the onset of inequality. Furthermore, the financial system is regarded as an aggregate sector where the interactions among financial institutions are neglected and money is essentially irrelevant. This session presents results from stock-flow consistent agent-based models that allow to make an assessment of the future impact of monetary and fiscal policies in terms of investments in the green sector and in terms of inequality.

Moderator: Andrea Roventini (SSSA)

Speakers: Matteo Deleidi (UCL), Daniele Giachini (SSSA), Mattia Guerini (OFCE), Francesco Lamperti (SSSA), Antoine Mandel (CNRS), Irene Monasterolo (WU), Lilit Popoyan (SSSA), Gesine Steudle (GCF)

12:30-14:00 Lunch Break and Poster Session

14:00-16:00 Research session 2: Sustainable finance and citizens. Sustainable finance cannot abstract away from the concept of citizens because the social dimension is key. This session examines the role of civic society in sustainable finance and the implications of sustainable finance for society, covering the following topics. First, the findings of recent surveys and experiments shed light on the drivers and barriers for citizens to engage in savings and investments associated with sustainability objectives. Second, the structure of the social network of actors investing in sustainable finance and in particular in impact investing helps understanding how information flows in this community. Third, the network of lobbying organizations turns out to be a crucial aspect for understanding the process of EU consultations in the policy areas of finance and climate. Forth, understanding citizens’ perception towards sustainable finance benefits a great deal from the analysis of social media and phenomena such as eco-chambers, polarization of opinions in online communities and fake news. Finally, the global monetary system is changing and the future scenarios affect how we think of sustainable finance already today.

Moderator: Giulia Porino (FW)

Speakers: Giulio Cimini (IMT), Luisa De Amicis (PV), Armin Haas (IASS), Monica Nagore (YF), Petra Kralj Novak (JSI), Joe Rini (IASS), Borut Sluban (UZH), Hamza Zeytinoglu (UZH)

16:00-16:30 Coffee Break

16:30-17:30 Research and Practice Session 1: Climate risk and impact: data and methods. There is growing consensus on the fact that sustainable finance needs appropriate and systematic methods to measure progress towards climate action at the level of project portfolios in order to provide actionable information. In particular, progress needs to be measured both in terms of risk and impact. Regarding risk, it is crucial to integrate in current metrics of financial risk sources of risk that are often not considered, such as climate, physical and transition risk. Regarding impact, we need to assess the contribution of project portfolios to climate action. This session examines current approaches and their applications as well as future directions.

Moderator: Stefano Battiston (UZH).

Speakers: t.b.a.

17:30-18:30 Research and Practice Session 2: Sustainable finance and Fintech. The Fintech sector has 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.

Moderator: Veronica Garcia Heller (BitLumen). Speakers: t.b.a.

Thursday, 18th January

08:30-09:00 Welcome and introduction to the practitioner sessions. Stefano Battiston (UZH).

09:00-10:00 Practitioner Session 1: Central Banks (I). Central banks play a critical role in the development of sustainable financial markets. In that context, leading central banks have started exploring the interlinkages between monetary policy, financial regulation as well as their supervisory functions and climate change. This session examines where they stand and discusses next steps for this agenda.

Moderator: Alexander Barkawi (Council on Economic Policies and Oikos)

Speakers: Representatives of central banks t.b.a.

10:00- 10:30 Coffee Break

10:30-11:30 Practitioner Session 2: Pension Funds. Pension funds are considered to be among the financial actors with a long-term time horizon for their investments. They are therefore increasingly concerned with climate-related risks, in particular with transition risk. This session discusses a recent voluntary initiative among Swiss pension funds to evaluate the alignment of portfolios to the 2 degrees target, in order to understand to what extent this kind of exercises could be exported to other countries and sectors.

Moderator: Carlo Jaeger (GCF)

Speakers: Silvia Ruprecht (Swiss Ministry of Environment), Stan Dupre (2 degrees investing), representatives from the Pension Fund industry

11:30-12:30 Practitioner Session 3: Development Banks. The session will focus on climate risk and impact metrics and methods to assess the exposure of development banks’ portfolios to climate risk, as well as their contribution to climate action (e.g. Sustainable Development Goals). By building on the experience of major development banks, we will discuss their progress towards better climate risk and impact disclosure, as well as the challenges and opportunities that they experience, both at the governance and project level. Finally, we will discuss what role could the academia play to support development banks in this process, by identifying specific areas of collaboration where synergies could be successfully exploited.

Moderator: Irene Monasterolo (WU)

Speakers: Barbara Buchner (CPI), Gael Giraud (Chief Economist, AFD), Monica Scatasta (EIB)

12:30 – 14:00 Lunch Break and Sustainable Business Corner

14:00-15:30 Practitioner Session 4: Asset Managers. Very recently some key players in the asset manager sector have started to demand better disclosure of climate risk and decarbonization plans from the fossil fuel companies in which they hold shares. Others have openly moved substantial portions of their funds towards ESG investments. However, these decisions entail profound organizational processes that should not be underestimated. This session discusses the incentives for investors to demand better disclosure of climate related financial information and the current barriers in terms of metrics and processes to narrow the gap between capital allocation and SDGs.

Moderator: Maximilian Horster, Managing Director, ISS-Ethix Climate Solutions t.b.c.

Speakers: Filippo Addarii (PV), representatives from UBS Impact investing, PKZH Asset Management Department, Vontobel thematic investment, t.b.c.

15:30-16:30 Policy and Research Session 1: EU-funded research and policy insights for sustainable finance. EU funded research has been playing and will play a crucial role in the development of the sustainable finance sector. In this session the future of EU research in areas related to sustainable finance is illustrated by representatives of the EU Commission. Further, the session discusses the main insights for the practitioners in sustainable finance stemming from current EU funded research projects such as DOLFINS, ISIGROWTH and GREENWIN.

Speakers: Filippo Addarii (PV), Stefano Battiston (UZH), Guido Caldarelli (IMT Lucca), Giovanni Dosi (SSSUP), Mariana Mazzucato (UCL), Carlo Jaeger (GCF), Representative of the EU Commission, t.b.c.

16:30 – 17:00 Coffee Break and Sustainable Business Corner

17:00-19:00 Key Panel Session. This session hosts world-renowned experts from academia, policy making institutions, the financial industry and development finance institutions to discuss how to narrow the gap between the capital allocation of private and public finance and sustainability. In particular, the session will discuss what the expectations from research and from policy are. The panel will also involve the broader audience in a discussion on the solutions ahead on how to ensure financial stability while promoting sustainable finance.

Moderator: Stefano Battiston (UZH)

Speakers Prof. Joseph Stiglitz (Columbia University), Mr. Graeme Maxton (Secretary General of Club of Rome), Ms. Mafalda Duarte (Head of Climate Investment Funds), Mr. Christopher Steane (Global Head of Lending Services at ING), Mr. Urban Angehrn (Group Chief Investment Officer and Member of the Executive Committee at Zurich Insurance Group).

 

Friday, 19th January

08:30-10:15 Research Session 3: Endogenous financial networks and the price of systemic risk (I). While the existence of a tradeoff between risk diversification and contagion has become evident to most scholars since the events of 2008, the underlying mathematical and economic mechanisms have been clarified only recently. This session examines the relations between the architecture of financial networks and their ability to amplify shocks both in a static and in an endogenous link formation setting. The results are relevant to for pricing the impact of systemic effects on the obligation of financial counterparties as well as the contribution of investors to financial stability.

Moderator: Mauro Napoletano (SPO)

Speakers: Paolo Barucca (UZH), Marco D’Errico (ESRB), Tarik Roukny (MIT t.b.c.), Inaki Aldasoro (BIS)

10:15-10:30 Coffee break

10:30-11:30 Research Session 3: Endogenous financial networks and the price of systemic risk (II)

Moderator: Marco D’Errico (ESRB)

Speakers: Steffen Schuldenzucker, Marco Bardoscia (BoE t.b.c.), Mauro Napoletano (SPO)

11:30-12:30 Research Session 4: Estimating systemic risk in financial networks. This session further examines the impact on the estimation of systemic risk from missing information on linkages among financial institutions and between financial institutions and common assets.

Moderator: Guido Caldarelli (IMT)

Giulio Cimini (IMT), Fabio Saracco (IMT), Tiziano Squartini (IMT), Fabio Vanni (SSSA)

12:30-14:00 Lunch Break

14:00-15:00 Practitioner Session 5: Central Banks (II). While most central banks’ mandate is focused on price stability, a major legacy from the Great Recession has been that price stability requires to look at financial stability from a systemic point of view and this in turn requires to look at the financial system as a multi-level network. This session discusses how the lessons from financial network models are applied in the practice to financial stability and macroprudential policies and what challenges regulators have to address in terms of both data and concepts.

Moderator: Stefano Battiston (UZH). Speakers: representatives of central banks t.b.a.

15:15-15:30 Short Break

15:30-16:30 Research and Practice Session 3: Sustainable Business and Finance. This session discusses how new ecosystems of sustainable business are emerging in the urban and rural context and what kind of financial services they imply.

Moderator: Katharina Serafimova. Speakers: t.b.a.

16:30-17:00 Coffee Break

17:00-18:00 Conclusive Panel Session

This session discusses the lessons learnt for both researchers and practitioners from the three days conference and the future direction for the coming year.

Moderators: Stefano Battiston (UZH) and Marc Chesney (UZH)

Speakers: Open floor discussion.