How risky is climate change? Environmental credit risk perception within a bank

Sarah Megan Boyar, Susan Howick

Research output: Contribution to conferenceAbstract

Abstract

The advent of free trade and the globalizing of markets in the 1980s coincided with an increase in ’surprise’ impairments and premature write-downs in accounting. The term stranded assets emerged during this era as a metaphor for a certain type of impairment, describing when an asset’s book value irreversibly becomes less than its market value due to changes in the regulatory environment. Originally the stranded assets metaphor was leveraged by major energy companies to win compensation when their business model was crippled by government-led deregulation and the transition to competition. In a recent twist, however, the phrase stranded assets has entered a more general public discourse due to the realization that if nations worldwide honour their carbon emissions commitments, then fossil fuel producers have far more production capacity on their books than will ever be demanded in the markets. My doctoral research examines how bank lenders perceive the risk of ’stranded fossil fuel assets’ in a context of global climate change. Bank lenders have increasingly included environmental considerations in their credit risk assessments. Many social theorists offer that uncertainties become risks when they enter formal management systems. In a case study with a global financial institution, my research draw upon techniques derived from System Dynamics to offer an account of the processes through which perception of environmental credit risk enters bank management systems.
Original languageEnglish
Publication statusUnpublished - 2015
Event27th European Conference on Operational Research (EURO XXVII) - University of Strathclyde, Glasgow, United Kingdom
Duration: 12 Jul 201515 Jul 2015

Conference

Conference27th European Conference on Operational Research (EURO XXVII)
CountryUnited Kingdom
CityGlasgow
Period12/07/1515/07/15

Keywords

  • free trade
  • globalisation
  • stranded assets
  • impairment
  • fossil fuels
  • global climate change
  • credit risk assessments

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    Boyar, S. M., & Howick, S. (2015). How risky is climate change? Environmental credit risk perception within a bank. Abstract from 27th European Conference on Operational Research (EURO XXVII), Glasgow, United Kingdom.