CLIMATE RISK AND FINANCIAL STABILITY
Syllabus
EN
IT
Learning Objectives
The course "Climate Risk and Financial Stability" contributes to the educational objectives of the MSc in Finance and Banking by providing students with the theoretical foundations and empirical tools required to analyze climate-related risks in financial markets and institutions. The course focuses on the measurement of physical and transition climate risks, their implications for banks, insurance companies, asset managers, and financial markets, and their potential consequences for financial stability.
Particular emphasis is placed on empirical analysis, quantitative methods, and the interpretation of data commonly used by financial institutions, central banks, supervisors, and international organizations. Students will learn how climate risk is incorporated into financial decision-making, risk management frameworks, stress-testing exercises, and macroprudential policy.
The course develops the ability to critically evaluate empirical evidence, apply quantitative methods to climate-finance questions, and assess the implications of climate-related shocks for the stability of the financial system.
EXPECTED LEARNING OUTCOMES
Knowledge and Understanding
Students will acquire knowledge of the main sources of climate-related financial risk and the channels through which these risks affect financial institutions and markets. They will understand the role of banks, insurance companies, financial markets, and regulatory authorities in managing climate risk and preserving financial stability.
Applying Knowledge and Understanding
Students will be able to measure climate risk using financial and climate-related datasets, interpret empirical findings in the climate-finance literature, evaluate climate stress-testing exercises, and assess the implications of climate-related shocks for financial institutions and the broader financial system.
Making Judgements
Students will develop the ability to critically assess methodologies, empirical evidence, and policy proposals related to climate risk management, financial regulation, and financial stability.
Communication Skills
Students will be able to communicate empirical findings and policy implications related to climate risk and financial stability in a clear and rigorous manner.
Learning Skills
Students will acquire the analytical skills necessary to independently evaluate emerging research and policy developments in climate finance and financial stability.
Particular emphasis is placed on empirical analysis, quantitative methods, and the interpretation of data commonly used by financial institutions, central banks, supervisors, and international organizations. Students will learn how climate risk is incorporated into financial decision-making, risk management frameworks, stress-testing exercises, and macroprudential policy.
The course develops the ability to critically evaluate empirical evidence, apply quantitative methods to climate-finance questions, and assess the implications of climate-related shocks for the stability of the financial system.
EXPECTED LEARNING OUTCOMES
Knowledge and Understanding
Students will acquire knowledge of the main sources of climate-related financial risk and the channels through which these risks affect financial institutions and markets. They will understand the role of banks, insurance companies, financial markets, and regulatory authorities in managing climate risk and preserving financial stability.
Applying Knowledge and Understanding
Students will be able to measure climate risk using financial and climate-related datasets, interpret empirical findings in the climate-finance literature, evaluate climate stress-testing exercises, and assess the implications of climate-related shocks for financial institutions and the broader financial system.
Making Judgements
Students will develop the ability to critically assess methodologies, empirical evidence, and policy proposals related to climate risk management, financial regulation, and financial stability.
Communication Skills
Students will be able to communicate empirical findings and policy implications related to climate risk and financial stability in a clear and rigorous manner.
Learning Skills
Students will acquire the analytical skills necessary to independently evaluate emerging research and policy developments in climate finance and financial stability.
Prerequisites
Students are expected to possess a basic knowledge of finance, financial markets, and financial institutions, as well as a solid understanding of introductory statistics and econometrics. Familiarity with regression analysis, hypothesis testing, and the interpretation of empirical results is recommended. No prior knowledge of climate economics or climate science is required.
Program
The course examines the implications of climate risk for financial institutions, financial markets, and financial stability. The analysis combines theoretical foundations with a strong emphasis on empirical evidence and quantitative methods.
Topics covered include:
Introduction to Climate Risk and Financial Stability. Physical and transition risks. Climate data and the measurement of climate-related financial risks. (Week 1)
Climate Risk and Financial Markets. Asset pricing, corporate finance, and transition risk. (Week 2)
Climate Risk and Banking. Credit markets, bank balance sheets, lending, and climate stress testing. (Week 3)
Insurance, Reinsurance, Climate Risk Transfer, and the Economics of Insurability. (Week 4)
Financial Networks, Systemic Risk, Macroprudential Policy, and the Role of Central Banks and Supervisors. (Week 5)
Climate-Related Financial Regulation, Research Frontiers, and Student Project Presentations. (Week 6)
Particular attention is devoted to the use of financial, economic, and climate-related data, as well as to the empirical methodologies commonly employed in the academic and policy literature. The course may also discuss recent developments in climate finance and financial regulation.
Topics covered include:
Introduction to Climate Risk and Financial Stability. Physical and transition risks. Climate data and the measurement of climate-related financial risks. (Week 1)
Climate Risk and Financial Markets. Asset pricing, corporate finance, and transition risk. (Week 2)
Climate Risk and Banking. Credit markets, bank balance sheets, lending, and climate stress testing. (Week 3)
Insurance, Reinsurance, Climate Risk Transfer, and the Economics of Insurability. (Week 4)
Financial Networks, Systemic Risk, Macroprudential Policy, and the Role of Central Banks and Supervisors. (Week 5)
Climate-Related Financial Regulation, Research Frontiers, and Student Project Presentations. (Week 6)
Particular attention is devoted to the use of financial, economic, and climate-related data, as well as to the empirical methodologies commonly employed in the academic and policy literature. The course may also discuss recent developments in climate finance and financial regulation.
Books
No mandatory textbook is required.
Course materials will consist of academic journal articles, reports published by central banks, supervisory authorities, and international organizations, as well as lecture notes and supplementary materials provided by the instructor.
Readings will be selected from recent contributions to the academic and policy literature in order to reflect ongoing developments in the fields of climate risk, finance, and financial stability.
Course materials will consist of academic journal articles, reports published by central banks, supervisory authorities, and international organizations, as well as lecture notes and supplementary materials provided by the instructor.
Readings will be selected from recent contributions to the academic and policy literature in order to reflect ongoing developments in the fields of climate risk, finance, and financial stability.
Bibliography
REFERENCE MATERIALS
Course materials will consist of selected academic journal articles, reports published by international institutions (such as the NGFS, ECB, BIS, EIOPA, IMF, and FSB), and lecture notes. Additional readings may be assigned during the course to reflect recent developments in the literature.
Course materials will consist of selected academic journal articles, reports published by international institutions (such as the NGFS, ECB, BIS, EIOPA, IMF, and FSB), and lecture notes. Additional readings may be assigned during the course to reflect recent developments in the literature.
Teaching methods
The course is delivered through lectures complemented by classroom discussions, case studies, and the analysis of empirical evidence drawn from recent academic research and reports published by national and international institutions. Particular emphasis is placed on the interpretation of empirical findings and the application of quantitative methods to the study of climate risk and financial stability. Students will also present and discuss a research project developed during the course.
Exam Rules
Student assessment is based on a final written examination and an individual or group project that will be presented and discussed in class.
The written examination is designed to assess students’ understanding of the theoretical concepts related to climate risk, financial institutions, and financial stability. Questions may require both knowledge of the material covered during the course and the ability to interpret empirical evidence and discuss policy implications.
The project is intended to develop students’ ability to apply quantitative and empirical methods to topics related to climate risk and financial stability. Students will present their work in class, discussing the data, methodology, results, and economic and financial implications of their analysis.
Attendance is not mandatory. Nevertheless, active participation in classroom discussions is strongly encouraged, as it contributes to the development of critical thinking, communication skills, and the ability to apply acquired knowledge.
The final grade will reflect performance in the written examination, the quality of the project and its presentation, and the student's ability to appropriately apply the concepts and analytical tools discussed during the course.
As a guideline:
18-22: satisfactory knowledge of the fundamental concepts and limited ability to apply analytical tools;
23-26: good knowledge of the course material and adequate ability to interpret and apply concepts;
27-30: thorough knowledge of the subject, strong critical thinking, and effective use of theoretical and empirical tools;
30 cum laude: excellent mastery of the subject, outstanding analytical skills, and a high degree of independence in applying methods and interpreting results.
The written examination is designed to assess students’ understanding of the theoretical concepts related to climate risk, financial institutions, and financial stability. Questions may require both knowledge of the material covered during the course and the ability to interpret empirical evidence and discuss policy implications.
The project is intended to develop students’ ability to apply quantitative and empirical methods to topics related to climate risk and financial stability. Students will present their work in class, discussing the data, methodology, results, and economic and financial implications of their analysis.
Attendance is not mandatory. Nevertheless, active participation in classroom discussions is strongly encouraged, as it contributes to the development of critical thinking, communication skills, and the ability to apply acquired knowledge.
The final grade will reflect performance in the written examination, the quality of the project and its presentation, and the student's ability to appropriately apply the concepts and analytical tools discussed during the course.
As a guideline:
18-22: satisfactory knowledge of the fundamental concepts and limited ability to apply analytical tools;
23-26: good knowledge of the course material and adequate ability to interpret and apply concepts;
27-30: thorough knowledge of the subject, strong critical thinking, and effective use of theoretical and empirical tools;
30 cum laude: excellent mastery of the subject, outstanding analytical skills, and a high degree of independence in applying methods and interpreting results.
Attendance Rules
Attendance is not mandatory but is strongly encouraged. Active participation in lectures and classroom discussions supports the learning process and helps students develop critical thinking skills and the ability to apply the theoretical and empirical tools presented during the course.