How 'prediction markets' could improve climate risk policies and investment decisions
A market-led approach could be key to guiding policy, research and business decisions about future climate risks, a new study outlines.
Published in the journal Nature Climate Change, the paper from academics at the Universities of Lancaster and Exeter details how expert ‘prediction markets’ could improve the climate-risk forecasts that guide key business and regulatory decisions.
Organisations now appreciate that they have to consider climate risks within their strategic plans — whether that relates to physical risks to buildings and sites, or risks associated with transitioning to achieve net zero.
However, the forward-looking information needed to inform these strategic decisions is limited, the researchers say.
Dr Kim Kaivanto, a co-author from Lancaster University’s Department of Economics, said: “The institutional arrangements under which climate-risk information is currently provided mirrors the incentive problems and conflicts of interest that prevailed in the credit-rating industry prior to the 2007/8 financial crisis.
“In order to make sense of emissions scenarios and to support planning and decision-making, organisations have a pressing need for this type of forward-looking expert risk information. More