Walking the Tightrope: Managing Transition Risk in a Divergent Net Zero Scenario

The International Energy Agency’s Net Zero 2050 initiative outlined the need to end financing for new oil & gas projects in order to keep climate change to under 1.5° C, but investors and regulators worry about the macroeconomic risks that could result from an unmanaged exit from fossil fuel projects rather than orderly transitions. Could regulatory action end up mitigating some ‘divergent Net Zero’ risks?

Global ambition to curtail climate change to 1.5° C may trigger more macroeconomic and financial stability concerns than regulators are comfortable withFinance Watch, a European Non-governmental Organisation (NGO), outlined a regulatory capital change they believe would be manageable and would better align incentives for financia...