Financial risks to coal value chain from a cost-conscious shift to renewables in India
A realignment of the financial sector is necessary to both enable the energy system transformation and manage financial risks implied by a transition to net-zero emissions. These include transition risks stemming from policies that limit or price greenhouse gas emissions. The financial sector has tu...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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IOP Publishing
2022-01-01
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| Series: | Environmental Research Letters |
| Subjects: | |
| Online Access: | https://doi.org/10.1088/1748-9326/aca036 |
| _version_ | 1797747290639695872 |
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| author | Alexandre C Köberle Gireesh Shrimali Shivika Mittal Abhinav Jindal Charles Donovan |
| author_facet | Alexandre C Köberle Gireesh Shrimali Shivika Mittal Abhinav Jindal Charles Donovan |
| author_sort | Alexandre C Köberle |
| collection | DOAJ |
| description | A realignment of the financial sector is necessary to both enable the energy system transformation and manage financial risks implied by a transition to net-zero emissions. These include transition risks stemming from policies that limit or price greenhouse gas emissions. The financial sector has turned to scenarios developed by the research community for information on how transitions may unfold. Emerging methodologies linking transition scenarios to risk assessment are in their early stages but are key to enable financial institutions (FIs) to carry out the task at hand. Commercial FIs are exposed to transition risks primarily through their portfolio holdings and how assets therein may fare in a transition. Understanding this counterparty risk is key for development and interpretation of climate-financial scenarios. FIs will need to consider how the firms in a portfolio—the counterparties—will react to the transition and their capacity to navigate the changes involved. Here we apply a transparent and flexible framework to explore transition risks to corporate firms from low-carbon transition scenarios. We show that considering firms’ strategic responses to the changes in their operating environment is an important determinant of the resulting transition risk estimates. We provide an illustrative case study of the coal value chain in India to demonstrate how the framework can be applied to both risk assessment and business strategy setting. |
| first_indexed | 2024-03-12T15:48:38Z |
| format | Article |
| id | doaj.art-1f91411ff34f4faa811a9ada729ca7ee |
| institution | Directory Open Access Journal |
| issn | 1748-9326 |
| language | English |
| last_indexed | 2024-03-12T15:48:38Z |
| publishDate | 2022-01-01 |
| publisher | IOP Publishing |
| record_format | Article |
| series | Environmental Research Letters |
| spelling | doaj.art-1f91411ff34f4faa811a9ada729ca7ee2023-08-09T15:17:37ZengIOP PublishingEnvironmental Research Letters1748-93262022-01-01171212400210.1088/1748-9326/aca036Financial risks to coal value chain from a cost-conscious shift to renewables in IndiaAlexandre C Köberle0https://orcid.org/0000-0003-0328-4750Gireesh Shrimali1https://orcid.org/0000-0002-8476-0108Shivika Mittal2https://orcid.org/0000-0003-4718-0064Abhinav Jindal3Charles Donovan4Centre for Climate Finance and Investment, Imperial College Business School , London, United Kingdom; Grantham Institute, Imperial College London , London, United KingdomGrantham Institute, Imperial College London , London, United Kingdom; Oxford Sustainable Finance Group, University of Oxford , Oxford, United KingdomCentre for Climate Finance and Investment, Imperial College Business School , London, United Kingdom; Grantham Institute, Imperial College London , London, United KingdomIndian Institute of Management Indore , Indore, IndiaCentre for Climate Finance and Investment, Imperial College Business School , London, United KingdomA realignment of the financial sector is necessary to both enable the energy system transformation and manage financial risks implied by a transition to net-zero emissions. These include transition risks stemming from policies that limit or price greenhouse gas emissions. The financial sector has turned to scenarios developed by the research community for information on how transitions may unfold. Emerging methodologies linking transition scenarios to risk assessment are in their early stages but are key to enable financial institutions (FIs) to carry out the task at hand. Commercial FIs are exposed to transition risks primarily through their portfolio holdings and how assets therein may fare in a transition. Understanding this counterparty risk is key for development and interpretation of climate-financial scenarios. FIs will need to consider how the firms in a portfolio—the counterparties—will react to the transition and their capacity to navigate the changes involved. Here we apply a transparent and flexible framework to explore transition risks to corporate firms from low-carbon transition scenarios. We show that considering firms’ strategic responses to the changes in their operating environment is an important determinant of the resulting transition risk estimates. We provide an illustrative case study of the coal value chain in India to demonstrate how the framework can be applied to both risk assessment and business strategy setting.https://doi.org/10.1088/1748-9326/aca036Indiatransition riskcoal phaseoutclimate financeproforma cash flow modeltransition scenarios |
| spellingShingle | Alexandre C Köberle Gireesh Shrimali Shivika Mittal Abhinav Jindal Charles Donovan Financial risks to coal value chain from a cost-conscious shift to renewables in India Environmental Research Letters India transition risk coal phaseout climate finance proforma cash flow model transition scenarios |
| title | Financial risks to coal value chain from a cost-conscious shift to renewables in India |
| title_full | Financial risks to coal value chain from a cost-conscious shift to renewables in India |
| title_fullStr | Financial risks to coal value chain from a cost-conscious shift to renewables in India |
| title_full_unstemmed | Financial risks to coal value chain from a cost-conscious shift to renewables in India |
| title_short | Financial risks to coal value chain from a cost-conscious shift to renewables in India |
| title_sort | financial risks to coal value chain from a cost conscious shift to renewables in india |
| topic | India transition risk coal phaseout climate finance proforma cash flow model transition scenarios |
| url | https://doi.org/10.1088/1748-9326/aca036 |
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