All swans are black in the dark: without 'long term risk analysis' all financial risks that are not likely to materialize on the short term are categorized as inevitable 'black swans'. The financial sector currently operates at high speed, with low beams.on a road increasingly paved with uncertainty (AI/automation revolution, climate change, geopolitical changes, etc.)
Since 2015,, 2° Investing Initiative's research has focused its research on documenting the short term focus (1 to 3 years) of risk analysis: in equity research, credit rating, corporate disclosure, active equity management, passive equity management, regulatory stress tests, etc.
The next step is to implement solutions. Climate scenario analysis, tested with hundreds of investors, banks and financial supervisors is a foot in the door. Beyond, the research findings have triggered the decision by the European Commission to develop policy responses (Sustainable Finance action plan).
But most concrete solutions remain to be invented and implemented: this is currently the focus of 2° Investing Initiative program on the topic and its peer Focusing Capital on the Long Term.
Methodological framework for financial supervisors
Conceptual framework for financial supervisors
Stress-testing approach for the next global crisis
Carbon intensity is not a proxy for carbon risk assessment