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Updated: Aug 9, 2025

An R-Based Landscape Validation of a Competing Risk Model
Published on: September 16, 2022
Risk measures and portfolio analysis in the paradigm of climate finance: a review
Siddhartha P Chakrabarty1, Suryadeepto Nag2
1Department of Mathematics and School of Business, Indian Institute of Technology Guwahati, Guwahati, Assam 781039 India.
Abstract:
Climate change brings with it new risks for the finance sector, which in turn provides new opportunities to mitigate this risk, emanating from climate change. To invest sustainably and move away from firms that have disproportionately high carbon footprints, investors need suitable risk measures and appropriate portfolio management approaches. In this paper, we conduct a review of the mathematical models used to measure carbon risk. Subsequently, we review portfolio optimization models based on modern portfolio theory and the incorporation of risk measures into portfolio optimization strategies. We find that there is a lack of consensus about the existence of a carbon premium or an equity greenium in stock prices. We also find that the literature on portfolio optimization techniques is comparatively nascent.
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