Library | ESG issues
Systemic Risk Management
Systemic risk refers to the possibility that an event at the company level could trigger severe instability or collapse in an entire industry or economy. It extends beyond individual failures, encompassing large-scale threats such as climate change, natural disasters, inflation, geopolitical crises, and pandemics. Effective systemic risk management requires proactive monitoring, regulatory safeguards, and resilience strategies to mitigate risks and ensure financial stability in an increasingly complex and uncertain global landscape.
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Confronting the insurability crisis: A new framework for natural hazard insurance
Finance Watch details a growing insurability crisis in Europe, where around three quarters of extreme weather losses remain uninsured. The report proposes a new framework, including mandatory public-private insurance schemes and a systemic risk capital buffer, to address protection gaps and incentivise risk reduction through harmonised regulatory standards.
Investing in Resilience: Building an insurance-centric framework for resilience investment
Carlyle and Marsh introduce an insurance-centric framework to incentivise resilience investment. It addresses structural barriers preventing the recognition of risk reduction in underwriting, offering a four-step protocol to translate documented measures into tangible financial benefits, such as lower premiums, reduced deductibles, and improved asset durability.
Sovereign Debt Assessment Model (First Update)
The Sovereign Debt Assessment Model by the Finance for Biodiversity Foundation evaluates the dual relationship between nature loss and sovereign debt sustainability to help investors manage nature-related risks.
A heat circuit breaker for the UK: Preparing for a hotter future: A framing report
This report by the National Heat Risk Commission examines the UK’s lack of preparedness for extreme heat following the summer of 2026. It highlights systemic risks, detailing over £4.4 billion in economic costs and 2,877 deaths, while proposing ten key recommendations to strengthen national heat governance and resilience.
Assessing biodiversity-related financial risks: Navigating the landscape of existing approaches
This OECD report examines methodologies for assessing biodiversity-related financial risks. It identifies physical and transition transmission channels, reviews metrics like Mean Species Abundance, and highlights the implications of the Kunming-Montreal Global Biodiversity Framework. The findings inform a new supervisory framework for central banks to manage ecosystem-related instability.
FSB takes stock of the wide range of regulatory and supervisory initiatives on nature-related financial risks
The Financial Stability Board (FSB) has published a stocktake of initiatives concerning nature-related financial risks. While some authorities recognise material risks from biodiversity loss, the global regulatory landscape remains at an early stage. Challenges include significant data gaps and the need to translate financial exposures into risk measures.
Middle-income economies: Navigating digital dependencies in AI
This report examines artificial intelligence dependency risks within ten middle-income economies. It identifies critical structural reliance on United States software and Chinese hardware. Recommending a strategy of ‘managed interdependence’, the report advocates for diversifying international partnerships and strengthening domestic regulatory institutions to ensure long-term economic resilience and policy autonomy.
Limiting overshoot: Navigating exceedance of 1.5°C and pathways towards return
This report examines the inevitability of exceeding the 1.5°C global warming limit and outlines strategies for navigating this overshoot. It details escalating non-linear risks to ecosystems, food security, and infrastructure, while emphasising that urgent mitigation and transformational adaptation are essential to limit peak temperatures and enable a return.
Private equity’s accountability deficit: The case for mandatory disclosure
This research identifies an accountability crisis in private equity due to declining arm’s-length exits and opaque valuations. It proposes mandatory financial disclosure for significant portfolio companies to prevent resource misallocation and systemic risks, drawing parallels to the failure of the conglomerate movement in the twentieth century.
The macroeconomic case for investing in climate adaptation
This report synthesises evidence from 300 studies to establish the macroeconomic case for climate adaptation. It projects global GDP per capita losses of 8% by 2050, rising to 12% in lower-income countries. Proactive adaptation offers median benefit-cost ratios of 4:1, bolstering fiscal stability and accelerating sustainable development.
Supercharging Australia's future: Mobilising capital for clean energy, industry and climate resilience
This report outlines the Investor Group on Climate Change’s policy priorities for 2026-2030. It identifies five essential jobs for climate policy to reduce systemic risk, attract private capital, and protect long-term economic value, aiming for a climate-resilient Australian economy on track for net zero emissions by 2050.
Rare earth elements: Pathways to secure and diversified supply chains
This International Energy Agency report assesses global rare earth supply chains and vulnerabilities. It highlights China's dominance, the USD 6.5 trillion economic risk from potential disruptions, and provides eight strategic recommendations to achieve secure, diversified, and resilient supply through international coordination, increased investment, and innovation in recycling and demand-side technologies.
Lethal humidity and the systemic risks of climate change
This report examines the systemic threats posed by lethal humidity, where extreme heat and moisture exceed human physiological limits. Focusing on historical cases and Indonesia, it details cascading impacts on health, energy, and agriculture. It calls for urgent emissions reductions and improved global cooling strategies to mitigate escalating climate risks.
AI Tailwinds, Energy Headwinds
This benchmark series examines economic growth and development across the East Asia and Pacific region. It explores the impact of artificial intelligence on industrial sectors and supply chains, alongside the challenges posed by energy costs and environmental factors for small states and emerging market economies.
Climate risks are economic risks: Adaptation outcomes for Financial Institutions
A resource from Climate Policy Initiative designed to help financial institutions track progress and assess the quality of adaptation and resilience finance while managing physical climate risks.
Too big to fail: critical natural systems as macro-critical infrastructure
This report introduces Systemically Important Natural Systems (SINS), analogous to systemically important banks. It argues that critical ecosystems are macro-critical infrastructure. The authors explore how formal SINS designation could embed nature-related risks into global financial governance, fiscal policy, and corporate decision-making to prevent systemic economic instability.
