Revisit The 3rd ESG & Climate Risk in Quantitative Finance Conference, originally presented 10th-12th May 2022
This 3 day event will be focusing on the latest developments, understanding, and implementation in TCFD. Discussing the strategies, challenges and opportunities that lie ahead within Climate Risk and ESG.
Engage, educate and share best practices with leading ESG quants and Climate Risk practitioners. Discussing the latest modelling methodologies, governance challenges with an inevitable increased drive towards ethical innovations.
Workshop Day: UNDERSTANDING ESG & CLIMATE RISK
by Maurizio Garro, Senior Lead – IBOR Transition programme, Lloyds Banking Group
- Understanding the importance of ESG as pillar of the banking prudential framework
- Classification and assessment of ESG risks
- Analysis of the potential impact of the ESG risks
- How to integrate climate change in risk management and disclose it as for the TCFD recommendations.
- Get a foundation of the ESG and climate change theory and more frequent applications
- Understanding the recommendations of the EBA and Task force on climate-related financial disclosures (TCFD).
- Understand the key categories of ESG risks and how to measure and report them
Conference Day One
THE ESG JOURNEY AND THE JOURNEY AHEAD FOR THE QUANTITATIVE COMMUNITY
by Navin Rauniar, Advisory Partner focusing on LIBOR, ESG, Climate Risk & TCFD, HSBC
TCFD AND THE CLIMATE-RELATED CORPORATE REPORTING LANDSCAPE
by Monica Filkova, CFA, Climate Change and ESG Manager, Chief Investment Office, Aviva
- The drivers behind climate-related disclosures
- What is TCFD?
- Overview of recommendations
- Scenario analysis
- TCFD and other reporting
- Overview of disclosure landscape
- Voluntary v mandatory. Principles v standards
- The concept of materiality
- Trends in corporate reporting
ESG MARKET RISK VALUATION AND MANAGEMENT
by Marco Bianchetti, Head of Internal Model Market Risk, Intesa Sanpaolo and
Jorge Miguel Vegas, Senior Expert in Risk Analytics office, Market and Financial Risk Management, Intesa Sanpaolo
- Market and regulatory context
- ESG data sources and scores
- ESG market data and financial instruments
- Pricing of ESG-linked instruments
- Market and counterparty risk measurement
- C&E stress test
In the last few years ESG (environmental, social and governance) related topics broke into the financial world. In particular, regulators issued a number of guidelines and expectations to include ESG risk in the business and risk management framework of financial institutions. In our work we show a possible implementation of ESG risk in a Bank’s valuation and market risk management framework.
SYSTEMATIC ESG RESEARCH: MEASURING ESG RETURN PREMIUM IN EQUITY MARKETS – THE RIGHT WAY
by Arik Ben Dor, Managing Director and Head of Quantitative Equity Research, Barclays
A common approach to measuring the effect of ESG (or ‘ESG premium’) in equities is to use the difference between a broad index and its ESG version. This approach, however, does not control for mismatches in systematic risk exposures and sector weights between the two indices that can contaminate the results. We introduce a new approach that addresses the issues and accurately measures ESG return premium in equities. We find that the ESG return premium in equities has been positive in the past decade in both US and Europe. We illustrate how investors could use our approach at the aggregate or more granular levels to measure ESG returns, as well as to construct portfolios with pure ESG exposures.
BREAKING QUANTITATIVE ESG AND CLIMATE RISK THROUGH INSTITUTIONAL BARRIERS
by Alexandria Fisher, Sustainable Finance Manager, Global Risk Institute
This presentation will cover:
- Common barriers within financial institutions slowing the adoption of quantitative ESG and climate risk;
- Options to accelerate quantitative ESG and climate risk adoption within organizations and techniques to overcome internal barriers, including methodological standardization, talent development, and data transparency; and
- A case study on the adoption of climate risk analytics and different approaches to quantitative climate scenario analysis within the Canadian financial community.
SUSTAINABLE INVESTMENT – EXPLORING THE LINKAGE BETWEEN ALPHA, ESG, AND SDG’S
by Miquel Noguer Alonso, Co–Founder and Chief Science Officer, Artificial Intelligence Finance Institute (AIFI) ________________________________________________________________________________________
ESG & CLIMATE RISK PANEL
- How do we balance alpha vs. ESG commitments
- Challenges and opportunities with ESG metrics
- Taxonomies for products and the challenges
- Opportunities for financial institutions
Conference Day Two
TRANSPARENCY DRIVES SUSTAINABLE FINANCE: THE CARBON EQUIVALENCE PRINCIPLE
by Chris Kenyon: Director, Head of XVA Quant Modelling, MUFG Securities EMEA plc
NON-LINEAR DISCOUNTING: MODELLING NOTIONAL-DEPENDENT DISCOUNTING (WITH A MOTIVATION FROM CLIMATE MODELS)
by Christian Fries, Head of Model Development, DZ Bank
We develop a model for non-linear discounting, where discount factors depend on the (accumulated) notional.
Under this model, the discount rate may become much smaller than the market rate.
As small (or even negative) social discount rates will lead to an increase in the social cost of carbon, we start by giving a (very) brief introduction to integrated assessment models that combine economic and climate models.
Turning to discounting, we review some aspects of risk-neutral valuation. We then derive an alternative risk-free discount factor from defaultable funding providers and introduce a notional dependent default probability. One cannot achieve such modelling through a bounded default intensity, but intensity-based models appear as a limit case.
Properties of the model are illustrated through numerical experiments, combining the approach with classical stochastic interest rate models, e.g. discrete term structure models (LIBOR market models).
- Motivation from Climate Models: Integrated Assessment Models (Sketch of the DICE Model)
- Review: Risk-Neutral Valuation, Replication, Default and Survival Probability
- Deriving a Discount Rate from Diversified Funding
- Notional Dependent Discount Rate: Non-Linear Discounting
- Properties of the Model / Numerical Experiments
"EMERGENCE OF THE SUSTAINABILITY LINKED BONDS”
FRIEND OR FOE TO SUSTAINABILITY?
by Diana Ouamar, Managing Director, Rima Consulting
WHAT THE PANDEMIC, WAR IN UKRAINE AND THE RETURN OF INFLATION TELL YOU ABOUT NAIVE ESG – A CONTRARIAN LOOK AT ESG.
by Erik Vynckier, Interim Chief Executive, Foresters Friendly Society ________________________________________________________________________________________
NEWS-BASED OPTIMAL ESG PORTFOLIOS
by Anatoly B. Schmidt, Finance and Risk Engineering, NYU Tandon School of Engineering ________________________________________________________________________________________
ADDING SUSTAINABILITY IN CRYPTOCURRENCIES AND NON-FUNGIBLE TOKENS (NFTS)
by Sumit Kumar, Senior Director (Capital Market), CERES Group Inc.
Cryptocurrencies and NFTs (Non-Fungible Tokens) are constantly under scanner for sustainability issues. Additionally, there is an ongoing debate concerning the environmental degradation caused by cryptocurrency mining and whether or not using renewable energy sources would solve its sustainability issues. It is obvious to put the cryptocurrency under the lens of sustainability as the entire world is targeting for UNSDG (United Nations’ sustainability development Goals) of 2030. While there are sustainability issues associated with Crypto and NFTs, it is also the fact that they add significant value to digital transactions in the form of security, ease of settlement, reducing the settlement delay, and providing a smooth and secure transaction overall. It is essential to strike a balance between the application of Cryptocurrencies and their sustainability footprints. The present work attempt to find factors that can incorporate sustainability into the decentralized transaction and make it more sustainable and environmentally friendly. We investigated a few cryptocurrencies based on their consensus algorithm, mining process, and potential application to promote a green and sustainable environment. This research concluded that there are ways to promote ESG and sustainability and an efficient way to manage carbon footprint using Cryptocurrencies and NFTs (Non-Fungible Tokens).
CONNECTING ESG TO CLIMATE RISK, SUSTAINABLE FINANCING, CARBON MARKETS, AND NET ZERO
by Navin Rauniar, Advisory Partner focusing on LIBOR, ESG, Climate Risk & TCFD, HSBC
Please note some presenter slides and video lecture recordings may be restricted due to company compliance.