Environmental Financial Risk
Center on Financial Risk in Environmental Systems
Environmental uncertainty poses a growing number of financial risks on society, with droughts, floods, extreme temperatures and violent storms imposing global costs that approach $500 billion a year. Financial instruments, such as index insurance or hedging contracts, can be used to mitigate economic losses from events, such as droughts and hurricanes. With a more advanced understanding of the environmental conditions and factors that give rise to these risks, opportunities abound to develop more innovative contract structures for a range of applications.
Research and developing tools for use in analyzing environmental financial risk requires interdisciplinary expertise in the areas of environmental modeling, economics and finance. Research is underway to identify and characterize financial risks linked to environmental events and transfer this work into practical application through relationships with the financial risk management community. UNC and Institute researchers are at the forefront of this emerging field that provides great potential for academic scholarship as well as significant application for a number of industries.