Edited by Guglielmo Maria Caporale, Professor of Economics and Finance, Department of Economics, Finance and Accounting, Brunel University of London, UK

‘This comprehensive Handbook analyses the effects of climate change on financial markets, examining the policy measures required to mitigate its negative impact on market efficiency and various asset classes such as stocks, bonds, currencies and other financial hedges. [...] A valuable resource for scholars and students of financial, macro, monetary, environmental and energy economics.’

• ContentsPART I INTRODUCTION1 Handbook of climate change and financial markets: an overview 2Guglielmo Maria CaporalePART II PHYSICAL CLIMATE RISK AND FINANCIAL MARKETS2 Physical climate risks, financial markets and monetary policy 11Joscha Beckmann3 Physical climate effects and natural capital: interactions and implications for economic and financial risk 24Elizabeth K. Kiser and Caroline Norris4 Climate physical risk and Asian stock market returns 57Marina Albanese, Guglielmo Maria Caporale, Ida Colella, and Nicola Spagnolo5 Climate-related physical risks and the financial sector 73Celso Brunetti, Benjamin Dennis, Gurubala Kotta, and Caroline Conley Norris6 Climate risk and financial stability: some panel evidence for the European banking sector 94Guglielmo Maria Caporale, Anamaria Diana Sova, and Robert SovaPART III THE IMPACT OF CLIMATE CHANGE ON MARKET EFFICIENCY AND ON DIFFERENT ASSET CLASSES7 Beliefs about climate risks and market efficiency 110Caterina Santi8 Market efficiency and climate change 127Alexandre C. Köberle, Sascha Dobbertin, and João Amaro de Matos9 Testing for persistence in German green and brown stock market indices 151Guglielmo Maria Caporale, Luis Alberiko Gil-Alana, Sakiru A. Solarin, and OlaOluwa S. Yaya10 The pricing of environmental risk: an empirical analysis of the European industry portfolios 163Nuno Cassola, Claudio Morana, and Elisa Ossola11 Linkages among carbon emissions, renewable energy, stock markets, and economic growth: evidence from the G7 countries 190Eleftheria Kostika and Nikiforos Laopodis12 Climate change and currency returns 220Ilias Filippou, Mark P. Taylor, and Taizhi Wu13 Navigating climatic risks: insights from the wheat market and strategies for financial hedging 241Giulia Nadalini and Silvia RomagnoliPART IV GREEN FINANCE AND ESG MEASUREMENT14 Financing the green transition: exploring corporate strategies and public policy options 271Agnieszka Gehringer15 Sustainable investments: evolution, strategies, and contribution to sustainability objectives 294Dilyara Salakhova16 Sustainable debt markets: the European perspective 330Serena Fatica17 Exploring the role of green finance in Italian SMEs: financing the circular economy 347Ginevra Coletti, Asia Guerreschi, and Massimiliano Mazzanti18 ESG measurement uncertainty in Europe and beyond: the missing financial link and accountability 367ZsuzsaR. Huszár19 ESG momentum in international equity returns and the SDG content of financial asset portfolios 393Phoebe Koundouri, Conrad Felix Michel Landis, Nikitas Pittis, and Panagiotis SamartzisPART V CLIMATE CHANGE AND POLICY ISSUES20 Breaking the ‘“tragedy of the horizon’”: taking stock of central banks’ climate-risk approaches a decade after Mark Carney’s speech 419David Barmes, Joseph Feyertag, Agnieszka Smoleńska, and Simon Dikau21 The greening of central banks 440Clara I. Gonzalez and Soledad Núñez22 Climate change and financial regulation 460Dimitri Demekas and Pierpaolo Grippa23 Financial interdependencies between carbon markets and energy commodities: an application for the European Union Emissions Trading System 495Andrea Flori24 Just transition: issues for central banks and financial regulators 529Pietro Calice and Dimitri G. Demekas25 Building scenarios for climate stress-testing exercises 560Stéphane Dées, Annabelle de Gaye, and Noëmie Lisack26 Regulatory yield curves and climate-related scenarios 592Fulvio Pegoraro

Edited by Guglielmo Maria Caporale, Professor of Economics and Finance, Department of Economics, Finance and Accounting, Brunel University of London, UK

‘This comprehensive Handbook analyses the effects of climate change on financial markets, examining the policy measures required to mitigate its negative impact on market efficiency and various asset classes such as stocks, bonds, currencies and other financial hedges. [...] A valuable resource for scholars and students of financial, macro, monetary, environmental and energy economics.’

• ContentsPART I INTRODUCTION1 Handbook of climate change and financial markets: an overview 2Guglielmo Maria CaporalePART II PHYSICAL CLIMATE RISK AND FINANCIAL MARKETS2 Physical climate risks, financial markets and monetary policy 11Joscha Beckmann3 Physical climate effects and natural capital: interactions and implications for economic and financial risk 24Elizabeth K. Kiser and Caroline Norris4 Climate physical risk and Asian stock market returns 57Marina Albanese, Guglielmo Maria Caporale, Ida Colella, and Nicola Spagnolo5 Climate-related physical risks and the financial sector 73Celso Brunetti, Benjamin Dennis, Gurubala Kotta, and Caroline Conley Norris6 Climate risk and financial stability: some panel evidence for the European banking sector 94Guglielmo Maria Caporale, Anamaria Diana Sova, and Robert SovaPART III THE IMPACT OF CLIMATE CHANGE ON MARKET EFFICIENCY AND ON DIFFERENT ASSET CLASSES7 Beliefs about climate risks and market efficiency 110Caterina Santi8 Market efficiency and climate change 127Alexandre C. Köberle, Sascha Dobbertin, and João Amaro de Matos9 Testing for persistence in German green and brown stock market indices 151Guglielmo Maria Caporale, Luis Alberiko Gil-Alana, Sakiru A. Solarin, and OlaOluwa S. Yaya10 The pricing of environmental risk: an empirical analysis of the European industry portfolios 163Nuno Cassola, Claudio Morana, and Elisa Ossola11 Linkages among carbon emissions, renewable energy, stock markets, and economic growth: evidence from the G7 countries 190Eleftheria Kostika and Nikiforos Laopodis12 Climate change and currency returns 220Ilias Filippou, Mark P. Taylor, and Taizhi Wu13 Navigating climatic risks: insights from the wheat market and strategies for financial hedging 241Giulia Nadalini and Silvia RomagnoliPART IV GREEN FINANCE AND ESG MEASUREMENT14 Financing the green transition: exploring corporate strategies and public policy options 271Agnieszka Gehringer15 Sustainable investments: evolution, strategies, and contribution to sustainability objectives 294Dilyara Salakhova16 Sustainable debt markets: the European perspective 330Serena Fatica17 Exploring the role of green finance in Italian SMEs: financing the circular economy 347Ginevra Coletti, Asia Guerreschi, and Massimiliano Mazzanti18 ESG measurement uncertainty in Europe and beyond: the missing financial link and accountability 367ZsuzsaR. Huszár19 ESG momentum in international equity returns and the SDG content of financial asset portfolios 393Phoebe Koundouri, Conrad Felix Michel Landis, Nikitas Pittis, and Panagiotis SamartzisPART V CLIMATE CHANGE AND POLICY ISSUES20 Breaking the ‘“tragedy of the horizon’”: taking stock of central banks’ climate-risk approaches a decade after Mark Carney’s speech 419David Barmes, Joseph Feyertag, Agnieszka Smoleńska, and Simon Dikau21 The greening of central banks 440Clara I. Gonzalez and Soledad Núñez22 Climate change and financial regulation 460Dimitri Demekas and Pierpaolo Grippa23 Financial interdependencies between carbon markets and energy commodities: an application for the European Union Emissions Trading System 495Andrea Flori24 Just transition: issues for central banks and financial regulators 529Pietro Calice and Dimitri G. Demekas25 Building scenarios for climate stress-testing exercises 560Stéphane Dées, Annabelle de Gaye, and Noëmie Lisack26 Regulatory yield curves and climate-related scenarios 592Fulvio Pegoraro