Climate-related financial risks as a governance challenge: An inclusive international public policy proposal

Abstract

This study focuses on climate-related financial risks as a governance issue, which drives our attention to the quality of stakeholders’ interactions. The theoretical approach is undertaken through the institutional literature lens, along with the works of Rawls (1971, 2001) and Sen (1992, 2000, 2009), and contributions from the conceptions of co-creation and inclusive development. The applied analysis is carried out by connecting climate change to financial risks under a scenario of uncertainty (Bolton, Despres, Pereira da Silva, Samama, & Svartzman, 2020; TCFD, 2017; Daniel, Litterman, & Wagner, 2019; Carney, 2016; Maier et al., 2016; NGFS, 2018, 2019). The core objective of this study is to present a public policy proposal that aims to support effective international climate-related agreements, from a procedural perspective. To this end, we start by presenting an institution, which is broken down into three propositions. This process enables us to undertake a critical analysis from a technical and normative standpoint. The latter is based on Bush (1987). The main contribution of this study is the rationale underlying that the best set of policies to face climate change issues is that representing agents’ strong engagement and commitment. Finally, although the applied analysis focuses on climate change issues, the discussion conducted here can be reproduced in other areas.