B-CCaS Director to speak at Workshop on Quantitative Methods for Green Finance in Rome

The Workshop is hosted by the Department of Economics and Finance of the University of Rome Tor Vergata, on 6 to 7 February.

Workshop on Quantitative Methods for Green Finance 2025

Luca's presentation focuses on Temperature Exposure and Financial Materiality. Current regulations for firms regarding the disclosure of financial risks from climate change are unstandardised and may not be based on financial materiality. To address this gap, Luca and his co-authors have developed a robust method for quantifying the financial material risks associated with changing temperature distributions on firm performance. By tracking changes in the variability of temperature anomalies across geographical and temporal dimensions, this approach enables quantitative, standardized, and comparable disclosures of material temperature risks, which are causally linked to financial, behavioural, and economic outcomes.

The research documents that temperature variability, rather than mean temperature, has a significant material financial impact. This is evidenced by its effect on US firms' stock returns and operating performance, where quarterly return-on-asset significantly declines with greater temperature variability, reflecting fundamental changes in firm value. These impacts are driven by reductions in consumer demand and labour productivity, coupled with shifts in media and investor attention.

The presentation further explores how firms can use the temperature variability metric to report their exposure to future temperature risks, providing financial markets with critical information about their vulnerability to climate-related temperature shocks. This metric also enables investors to evaluate the exposure of companies within their portfolios over a relevant future horizon.

This research provides a geographically scalable statistical framework for assessing the quantitative effects of climate-related physical risks, such as shifts in temperature distribution, offering a practical tool for improving the disclosure of material climate risks, helping firms, investors, and government agencies address the climate risk information gap and make informed decisions.