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Macroeconomic climate risk impacts

Following Alogoskoufis et al. (2021), we first construct and calibrate regressions for total assets and revenues based on recursive equations, including GDP and inflation. We then inject the climate scenario projections of GDP and inflation into the regression models to project total assets and revenues in each scenario. This explains the macroeconomic channels by which climate risks impact the financials of infrastructure assets.

There are two main types of infrastructure companies: corporate and project-type companies. Project-type companies, also called special purpose vehicles, are single-project or project-financed firms with a planned investment end. Corporate-type companies hold multiple projects without a pre-defined investment end. Because both types of infrastructure companies can exhibit fundamental differences in behaviour, we modelled them separately.

Alogoskoufis, S., Dunz, N., Emambakhsh, T., Hennig, T., Kaijser, M., Kouratzoglou, C., … Salleo, C. (2021). ECB economy-wide climate stress test. Methodology and results. Occasional Paper Series. European Central Bank, 281.

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