The objective of the study was to assess the transitional and physical risks from climate change on financial market stability. It was commissioned by the German Finance Ministry and conducted by South Pole Group in collaboration with the Center for Sustainable and Social Products (CSSP), the University of Hamburg and the insurance company Munich Re.
According to a South Pole Group statement, physical risks related to climate change have a minimal risk of impacting financial market stability in Germany up to the year 2030. Transitional risks, on the other hand, pose a much higher threat. For example, a sudden pricing of the economic costs of climate change into financial markets, such as an abrupt and considerable adjustment of carbon prices, could lead to significant losses. If this were to be combined with other financial market risks, it could pose a threat to overall market stability.
The study also found that timely introduction of regulations adapted to international climate targets could increase market stability.