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.

Conference

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

Fingerprint

Risk perception
risk perception
Climate change
Fossil fuels
climate change
fossil fuel
market
Deregulation
free trade
deregulation
carbon emission
Risk assessment
global climate
Industry
Dynamical systems
risk assessment
Lead
Carbon
energy
credit

Keywords

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

Cite this

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.
Boyar, Sarah Megan ; Howick, Susan. / 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.
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author = "Boyar, {Sarah Megan} and Susan Howick",
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note = "27th European Conference on Operational Research (EURO XXVII) ; Conference date: 12-07-2015 Through 15-07-2015",

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Boyar, SM & Howick, S 2015, 'How risky is climate change? Environmental credit risk perception within a bank' 27th European Conference on Operational Research (EURO XXVII), Glasgow, United Kingdom, 12/07/15 - 15/07/15, .

How risky is climate change? Environmental credit risk perception within a bank. / Boyar, Sarah Megan; Howick, Susan.

2015. Abstract from 27th European Conference on Operational Research (EURO XXVII), Glasgow, United Kingdom.

Research output: Contribution to conferenceAbstract

TY - CONF

T1 - How risky is climate change? Environmental credit risk perception within a bank

AU - Boyar, Sarah Megan

AU - Howick, Susan

PY - 2015

Y1 - 2015

N2 - 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.

AB - 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.

KW - free trade

KW - globalisation

KW - stranded assets

KW - impairment

KW - fossil fuels

KW - global climate change

KW - credit risk assessments

UR - http://euro2015.euro-online.org/

UR - https://www.euro-online.org/media_site/reports/EURO27_AB.pdf

M3 - Abstract

ER -

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