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The Centre for Climate Finance and Investment (CCFI) brought together leaders from finance, insurance, law, technology, policy and academia for an event on Climate Resilience & Economic Security during London Climate Action Week (20-28 June).

Abigail Ng and Rowan Douglas at London Climate Action Week

2 minute read

“Representation influences capital allocation” says Lara Cathcart at 51�Թ��’s third annual Women in Finance event

Shamita Harsh — Mon, 14 Apr 2025 10:15:24 +0000

“Representation influences capital allocation” says Lara Cathcart at 51�Թ��’s third annual Women in Finance event

Shamita Harsh Mon, 14/04/2025 - 10:15

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Once characterised as a “boys’ club”, the finance sector is undergoing a cultural shift that is reshaping how decisions are made. Greater representation at senior levels is increasingly recognised as influencing how capital is allocated.

51�Թ�� Business School’s third annual Women in Finance event explored how women are influencing capital markets and redefining leadership across sustainable finance.

An investment narrative that is rooted in embracing change

The keynote address was delivered by Hortense Bioy, former Head of Sustainable Investing Research at Morningstar Sustainalytics, who focused on building a more sustainable and inclusive financial future. She explored how geopolitical uncertainty has reshaped sustainable investing strategies, creating both complexity and opportunity.

“The media often debates whether ESG is dead,” Bioy observed. “What we are witnessing right now is an evolution of practices, a recalibration by businesses and investors alike. What’s fading is a version of ESG that relied heavily on labels and was often disconnected from financial outcomes, to make room for pragmatism and realism.”

Her message underscored the importance of data-driven research and thoughtful analysis in navigating rapidly changing markets. She also offered advice to young women entering the sector, encouraging attendees to embrace opportunity: “Step beyond your comfort zone. Visibility and persistence matter. No is rarely the end.”

“Through events like Women in Finance, 51�Թ�� Business School reaffirms its commitment to advancing women across the financial sector, creating space for leadership, visibility and meaningful dialogue.”

Lara Cathcart

Professor of Finance, Academic Director for MSc Finance and MSc Risk Management and Financial Engineering

Improving gender inclusion in sustainable finance

The panel discussion, moderated by Fiona Frick, Finance Advisory Board Member and Founding Partner at Circe Invest, examined how female voices are shaping sustainable finance, impact investing and fintech.

Lise Renelleau, Head of Research and Innovation for the IQ Lab at HSBC Asset Management, reinforced the importance of measurable impact. She expressed optimism that as access to high-quality data improves, ESG – once perceived as a top-down imposition – is increasingly being integrated into portfolio construction and reporting. While AI and advanced technologies can enhance data analysis, she stressed that human judgement remains essential in translating information into meaningful insight.

Kamini Banga, Chair of the Banga Family Trust, reflected on her experience working in India, where workplace equity was less established when she began her career. From identifying public healthcare investment needs in rural communities to overseeing family enterprise, she highlighted the importance of a just transition in emerging markets.

Zoe Jankel, Vice President and Senior Credit Officer at Moody’s Ratings, spoke about cultural change within organisations. She noted a shift away from expectations that women must conform to traditionally masculine leadership styles. Increasingly, authenticity is recognised and valued at senior levels.

The evening concluded with remarks from Lara Cathcart, Academic Director for MSc Finance and MSc Risk Management and Financial Engineering. Acknowledging the significant evolution in the finance industry, she reflected that there are still male-dominated pockets, especially at the senior leadership level:

“Representation is not simply about equity; it directly influences how capital is allocated, how risk is assessed, and how innovation is fostered. Through events like Women in Finance, 51�Թ�� Business School reaffirms its commitment to advancing women across the financial sector, creating space for leadership, visibility and meaningful dialogue.”

Note: This article's headline was updated from: “Representation influences capital allocation” says Professor of Finance at 51�Թ��’s third annual Women in Finance event on 05.03.2026.

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51�Թ�� Business School’s event showcased female leaders driving sustainable investing, ESG innovation and long-term value creation.

Main image: 51�Թ�� Business School | Fergus Burnett

3 minute read

Alumni blog: Why Angel Invest?

Francesca Hoare — Tue, 04 Mar 2025 09:31:29 +0000

Alumni blog: Why Angel Invest?

Francesca Hoare Tue, 04/03/2025 - 09:31

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Lessons, insights and early career advice from 51�Թ�� Business School Master’s alumni

We recently caught up with some of our Master’s alumni, who reflected on their early careers after graduating from 51�Թ�� Business School. In this blog, they draw on their own experience to offer advice to those who are about to enter the job market.

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Real career advice from 51�Թ�� MBA alumni

We recently caught up with alumni from 51�Թ�� Business School’s Full-Time MBA, Weekend MBA and Global Online MBA programmes, who shared insights and advice into succeeding in your career post-MBA studies. Read what they have to say in this blog.

28 July 2020

Alumni

Written by Matthew Stafford (Executive MBA 2010), Co-founder of 9others, a network of over 4,000 entrepreneurs in 45 global cities. He is also the co-founded of the DMG Syndicate, which helps grow startups via syndicate investment, as well as writing his own blog.

Why Angel Invest? There's nothing else quite like it

Over the last few years I’ve built up a small investment portfolio and my aim is to have investments in 100 startups. In this post I’ll give some background about why I think being an Angel Investor in startups is a good idea, and a fascinating and exciting space to be in. And to help you make better decisions when it comes to investment.

What do we mean by the term ‘investing’?

Investing is a broad term and will be used more and more. I predict that, in a similar way to the last decade ending with everyone calling themselves an ‘entrepreneur’, the 2020s is going to end with everyone calling themselves an ‘investor’.

Venture Capital (VC) is a catch-all but a good catch-all for Angel Investing. It’s capital for the (ad)venture. The type of companies that the investment goes into are startups; newly formed businesses that are started with the aim of achieving massive success and impact. Think Facebook when Mark Zuckerberg was still at Harvard, Uber when it was one of Travis Kalanick’s side projects, or Airbnb when they were selling breakfast cereal.

As with many adventures though, Angel Investing is risky. Very risky. For every Uber there are thousands of startups that fail to get anywhere close. But the thing that people often forget when thinking about how risky investing in startups is, is that the maximum amount of money investors can typically lose is 1x whatever invest. And with the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme tax breaks for UK Angel Investors it’s often less than that.

With risk comes reward and the upside for Angel Investing can be huge. For example one angel investor who put $25k into Uber in their 2010 seed round turned out to be worth over $124m at IPO (May 2019).

Why become an Angel Investor? And why now?

I first started learning properly about VC at 51�Թ�� Business School when studying for my MBA. I studied Software Engineering at Durham University during the early years of Facebook, Gmail and Twitter. I programmed enough code to know how websites like those worked and the incredible impact they could have. After Durham I moved to London and worked as an Analyst and Architect for some software companies. I worked at three different companies inside two years. I moved around a lot because I was hungry to work hard but wanted to have impact and get the rewards for that hard work. After a while I realised that it wasn’t going to happen.

So after joining the third software company in 2008 I started exploring the idea of gaining an MBA to give my career a boost. I was accepted at 51�Թ�� Business School and that changed everything. Studying Software Engineering at Durham meant a classroom of 32 other male undergraduates. No women. And no one really talked to each other that much, except online. Business school was thankfully more diverse. I met people from all sorts of different industries and stages in their careers and learnt a huge variety of subject matter. Durham was pretty much a maths degree with a bit of programming whereas 51�Թ�� was almost two years of strategy, accounting, marketing, economics, statistics, organisational behaviour, corporate finance, entrepreneurship, private equity and Venture Capital. VC was by far my favourite — the chance of having a small stake in a bunch of young, fast growing, virtually limitless potential companies was certainly appealing.

With risk comes reward and the upside for Angel Investing can be huge.

After graduating in 2010 I got a job with a small investment and advisory firm in London. I was taken on to work on London’s ‘Gateway2Investment’ programme, a GLA and EU backed programme to help London’s (mostly tech) startups become more investment-ready. In the next 18 months the team helped 52 companies raise over £23m in equity investment. This was right at the start of the latest wave of entrepreneurship. Now it’s common to be an entrepreneur, but back then it was a bit weird — why, just after the credit crunch, would anyone want to start a startup?

What I saw during 2010 and 2011 led to me co-founding 9others. What started over one meal for me and ‘9 others’ in December 2011 has grown into a global network of over 4,000 attendees in 47 cities around the world. At each meal entrepreneurs share a challenge and help each other out and it’s through these trusted relationships that drives everything I do. It’s because of 9others that I’ve met the founders of Uber, CityMapper, what3words, OneFineStay, Stripe and many more. No matter what happens (even a global pandemic) I will always be able to host a meal with 9others.

Throughout 2012 and 2013, I caught the bug for investment. In 2013 I left my job and struck out on my own, consulting with startups and some big companies that wanted to learn from them.

In 2016 I co-founded Dot Matrix Group (DMG). DMG is a syndicate of Angel Investors (68 at the time of writing) with a growing portfolio of startup investments. The investment opportunities typically come from the 9others network as that’s where I can get to know people, help out and learn how they operate and conduct themselves. We work hard to add value with the network and expertise of ourselves and DMG syndicate members.

So far so good?

Getting to this point has taken 10 years. A lot of it has been pretty gruelling but I’ve absolutely loved it too.

What I want to do now is help more people explore the possibility of becoming an Angel Investor by understanding the decision making process you need to go through.

There’s lots to consider: There’s deal flow (getting visibility of enough opportunities), there’s access (being able to invest in the hot deals) and being patient and having good judgement (balancing gut feel vs hard analysis).

So why do it? For me it’s the opportunity to contribute to and learn from some of the smartest people in the world. And with that there’s the chance to get a return unlike any other.

You can connect with Matthew via LinkedIn or on Twitter, or read more in his blog.

Programme

5 minute read

What really helps SMEs through downturns?

Cláudia Custódio — Wed, 15 Jan 2025 12:14:02 +0000

What really helps SMEs through downturns?

Cláudia Custódio Wed, 15/01/2025 - 12:14

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Article at a glance:

Cláudia Custódio’s study examined an ongoing Portuguese plan to help healthy small businesses during the 2008 economic crisis and the decade that followed. Key findings include:

Targeted credit guarantees can be a powerful tool to preserve jobs, sustain investment and strengthen productivity. This is successful only when deployed selectively and at moments of genuine financial stress. There were no discernible benefits during times of growth.
Well-designed schemes support viable firms, rather than propping up unproductive ones.
Banks and business leaders play a critical role in ensuring support reaches firms that can use it productively

Small businesses are the backbone of most national economies, accounting for 90 per cent of businesses worldwide (World Bank) and 99 per cent of UK businesses. And there are many government initiatives to help them - but some schemes risk propping up inefficient and failing ventures.

Our research examined an ongoing Portuguese plan to help healthy small businesses during the economic crisis of 2008 and into the decade that followed. By using state of the art research methods, the results showed without doubt the positive impacts – and when support was no longer effective.

Amid a worldwide credit squeeze in the wake of the downturn, the Portuguese government offered these firms access to cheaper, largely guaranteed bank loans – thereby removing most of the risk for banks. Their eligibility was decided based on annual reviews and criteria such as sound finances and performance.

The study looked at a decade’s worth of data which ran beyond the recession and the subsequent sovereign debt crisis in the Eurozone and on into years of economic expansion. And the results are clear. In times of economic crises, small businesses which benefitted from cheaper guaranteed credit tended to invest more, recruit more staff and were more likely to become exporters. During this time the scheme boosted growth and appeared to improve productivity.

But importantly, cheaper guaranteed credit only had an impact during economic downtimes – there were no discernible benefits during times of growth.

What can policy makers take from these findings?

Targeted finance works with a few caveats: schemes to ease access to cheaper finance are highly effective if disbursed with discretion. While small businesses account for nearly two thirds of jobs in the UK’s private sector, it’s unproven that blanket support – such as the loans and furlough schemes extended in the UK during the Covid 19 pandemic – will produce the same results. These schemes must be precisely designed, targeted and reviewed.

Blanket support is not proven to deliver the same benefits over different business cycles: findings suggest targeted loan guarantees are ineffective during good times – it’s only during recessions that these small businesses benefit from a credit boost.

Eligibility criteria differ for different economies: these targeted firms are probably among those who benefit from smoothly functioning capital markets during good times and don’t need government support – possibly an indication that the threshold for eligible firms in Portugal was set too high during the expansion period. Given the UK’s concerns over lacklustre productivity, it’s promising that we see mild benefits from this targeted support – eligible companies became more productive, although these effects took time to emerge.

Narrowed gaps between levels of productivity across industries: – according to economic models, these findings reflected that capital is better allocated among businesses, possibly allowing companies to improve their productivity.

Employment effects are mixed: while there was a net uptick in job numbers, we also deduced that companies investing seemed also to lose some roles. Could it be that companies buying new equipment might be hiring new staff to operate it? Departing employees remained unemployed – an impact that policy makers will certainly care about.

What can banks and small businesses do?

This was a tightly targeted programme which removed much, but not all, of the risk for banks themselves. We discovered that many small businesses didn’t know about the support on offer and that take up was low in the early stages. Could banks act as important go-betweens to communicate available schemes to relevant small businesses?

Small business leaders reported that the bureaucracy involved in applying for a loan was too arduous – but our research shows that it’s worth the effort. Companies who benefitted were those judged to be in good financial health, without too much debt or too many unpaid bills – it pays to keep your house in order.

Targeted credit guarantees can be a powerful tool to preserve jobs, sustain investment and strengthen productivity. The Business School’s research suggests this is successful only when deployed selectively and at moments of genuine financial stress.

Find out more about the research

Read Cláudia Custódio’s paper here

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Can banks and policy makers help small businesses through recessions?

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Dr Harsha Dutta on finance, development and inclusion

Shamita Harsh — Wed, 15 Jan 2025 12:14:02 +0000

Dr Harsha Dutta on finance, development and inclusion

Shamita Harsh Wed, 15/01/2025 - 12:14

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Dr Harsha Dutta joined 51�Թ�� Business School as Assistant Professor of Finance, bringing with him a research agenda that bridges financial economics with development and political economy. Dr Dutta joins us after finishing his PhD in Finance at The Hong Kong University of Science & Technology (HKUST).

His work scrutinises the unique incentives and constraint that households and firms face in developing economies, shedding light on how financial markets and local politics in these economies shape long-term growth and inequality.

“I’m looking forward to working alongside 51�Թ��’s exceptional business scholars and the broader research community,” he says. “London's historical position as a global financial centre, combined with its rich archival resources, provides an inspiring environment for uncovering new insights from the past to inform modern financial policies.”

Finance findings with an inclusion lens

Dr Dutta’s research focuses on how changes to incentives force strategic adaptations that result in different economic outcomes for different sections of the society. His work uncovers insights from novel and unconventional empirical settings, using unique datasets to answer questions that are often difficult to explore in traditional markets. His findings not only advance finance scholarship but also generate insights relevant for policymakers seeking to design more inclusive and effective institutions.

His research draws insights from both contemporary economies and historical contexts. For example, his paper “Unequal Legacies of Financial Crises: Evidence from the Panic of 1873” traces the long-term effects of America’s first major economic depression. Using railroad records and census data across four generations, he shows how urban families displaced during the crisis experienced enduring disadvantages—poorer education, jobs and wealth compared to the unaffected. Such findings provide fresh perspectives on how financial shocks can shape inequality for more than a century.

Dr Dutta’s research has been recognised by leading institutions. He was awarded the SBM PhD Research Excellence Award (2024–25) at HKUST, where he completed his doctoral studies, as well as the Best PhD Paper Award at the HKUST Business School PhD Conference. His work has also attracted grant funding from the NSE–NYU Stern Initiative on the Study of Indian Capital Markets, a joint venture of the National Stock Exchange of India (NSE) and the Center for Global Economy and Business at NYU Stern School of Business.

By examining evidence from distinctive historical and development settings, Dr Dutta illuminates mechanisms often hidden in conventional data. His approach underscores not only the economic but also the social and political implications of financial systems.

His broader academic contributions include publications in top-tier general interest journals such as Science Advances. His work has enabled him to provide new evidence on key questions in financial economics while generating insights relevant for both academic research and policy design.

Shaping financial dialogue for students at 51�Թ��

Dr Dutta is eager to continue exploring how the interplay between financial systems and institutions shapes economic outcomes, while contributing to the School’s interdisciplinary approach to business research. By drawing on his expertise in both historical and contemporary settings, he aims to teach students to think beyond conventional boundaries and uncover hidden patterns, fostering dialogue across economics and policy and equip them with know-how to identify how today's policy changes and market shifts will create tomorrow's unintended consequences.

Dr Dutta brings fresh perspectives to the study of finance and his arrival at 51�Թ�� signals an exciting step forward in the School’s ambition to deepen understanding of how financial systems can promote growth while addressing inequality in an interconnected world.

Read about the new faculty joining the Business School

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Exploring how finance shapes growth and opportunity through the lens of history

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When winning comes at a price: The business of pay-to-win add-ons

Mushegh Harutyunyan — Wed, 15 Jan 2025 12:14:02 +0000

When winning comes at a price: The business of pay-to-win add-ons

Mushegh Harutyunyan Wed, 15/01/2025 - 12:14

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17 September 2025

The video game industry is booming. According to Statista, more than three billion people played video games worldwide in 2024. As per PwC’s Global Entertainment and Media Outlook 2022-26, the gaming industry is tipped to maintain its recent rapid growth, and could be worth $321 billion by 2026. A big slice of that — $82 billion in 2024 — came from in-game purchases such as cosmetic “skins”, virtual currency, map packs, and more. In the UK, a recent Censuswide poll revealed that gamers, on average, spend £540 a year on in-game purchases (£22 a month) and subscriptions (£23 a month).

One of the most debated forms of in-game spending is the pay-to-win add-on, a digital item that gives players a clear advantage in player-versus-player games. A special weapon in Call of Duty: Warzone, a premium camouflage in Escape from Tarkov, or unique cards in Hearthstone can tilt the odds decisively in favor of paying players. For the buyer, these items boost the chance of winning; for everyone else, they create a frustrating disadvantage. One gamer described their game experience bluntly: “It was absurd and halfway to unplayable if you didn’t drain your wallet.”

The developer’s dilemma

At first glance, offering P2W add-ons seems like easy money. They cost little to produce and appeal directly to players’ powerful motivations: the desire to win and the dread of losing. Yet our research shows that the business case is more nuanced.

Unlike traditional add-ons (like hotel WiFi or an extended warranty), the value of P2W items is shaped by network effects. Their appeal grows when few players own them, because they confer an advantage over many others. But as adoption of P2W items spreads, their edge diminishes.

Players who do not spend on P2W may abandon the game entirely as they face a daunting competitive disadvantage against the large number of P2W owners. The fewer non-buyers remain, the smaller is the pool of players against whom P2W will bring an advantage, further eroding the add-on’s value. This negative network effect created by the P2W add-ons calls for a careful assessment of market conditions before introducing them. We find that ironically, when a large share of players is willing to buy, introducing P2W can reduce profits, leaving developers better off without it.

The psychology of competition makes this balance even trickier. Players who are highly motivated by winning make the add-on more lucrative: the thrill of victory increases their willingness to pay. But the story is different with loss sensitivity. If defeats sting only mildly, add-ons hold little attraction. If they sting too much, non-buyers disengage altogether. Developers can influence these sensitivities through design choices — making victories more rewarding while keeping defeats painful but not unbearable.

Design and pricing

One might assume that the stronger the add-on, the better for profits. Yet our findings suggest otherwise. Making the add-on too powerful discourages non-buyers from playing at all, shrinking the competitive field and eroding the add-on’s value. In highly competitive genres, developers may actually benefit from deliberately limiting the power of pay-to-win items, ensuring the game remains engaging for all.

The introduction of P2W items forces developers to lower the base game price to keep P2W-non-buyers in the fold, compensating their disadvantage against P2W-buyers. In some cases, this means shifting to a freemium model, or even — in theory — setting a negative price, paying players to participate because their presence sustains the market for add-ons. And while lower prices might seem to discourage investment in quality, the opposite can happen: when losses feel especially painful for non-buyers, developers are pushed to raise quality to keep them engaged.

Perhaps most surprising is what this means for players themselves. P2W is often accused of undermining fairness and reducing enjoyment. Yet under the right conditions, our analysis shows it can actually increase player surplus. By broadening the player base and motivating higher investment in quality, the system can leave players better off than in a world without P2W.

Keeping the pond healthy

Players are often categorised into "whales" (big spenders), "dolphins" (moderate spenders) and "minnows" (low or non-spenders). For developers, pay-to-win add-ons are a tempting way to extract more profits from the less price-sensitive whales and dolphins. Yet their very success depends on the participation of the more price-sensitive minnows. These players may never spend much, but their presence ensures that competitive advantages remain meaningful for others. If minnows abandon the game, the pond dries up — and the value of P2W erodes with it.

The lesson is clear: introducing P2W is not simply about monetizing the biggest spenders. It is about keeping the entire ecosystem in balance. Developers who want sustainable profits must design their games so that whales, dolphins, and minnows can all swim in the same pond — even if not on equal terms.

Explore key findings

Access the paper by Mushegh Harutyunyan and Esma Koca

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Pay-to-win (P2W) add-ons are controversial in the gaming industry. New research by Mushegh Harutyunyan and Esma Koca reveals when a game developer should introduce a P2W add-on and how to design and price it.

Main image: Milan_Jovic / iStock via Getty Images Plus

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The Banker quotes Professor Gilles Chemla on HSBC's new gold token for retail investors in Hong Kong

Evie Burrows-Taylor — Mon, 15 Apr 2024 14:42:30 +0000

The Banker quotes Professor Gilles Chemla on HSBC's new gold token for retail investors in Hong Kong Evie Burrows-Taylor Mon, 15/04/2024 - 14:42

2 April 2024

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Economics & Public Policy

How central bank's interest rate rises affect the richest and poorest families

José-Luis Peydró — Thu, 08 Sep 2022 10:03:58 +0000

How central bank's interest rate rises affect the richest and poorest families

José-Luis Peydró Thu, 08/09/2022 - 10:03

21 September 2022

Received wisdom has it that low rates boost economic growth, spreading wealth across society. But Professor José-Luis Peydró and his colleagues have been able to reveal the truth

Higher fuel costs stoked by the crisis in Ukraine have refocused attention on the inequalities of income and wealth. Rising prices threaten to hit the poorest the hardest, but at the same time higher interest rates can hit families with mortgages and consumer loans; both of which could fuel a recession that would again make life harder for lower income households.

But lower rates, which have been the norm in developed economies for the last decade, aren’t an economic cure-all.

Examining the effects of interest rates through tax records

We’ve been able to investigate in granular detail who gains, and by how much, when central banks ease rates, in a bid to understand the underlying dynamics of wealth and income. With access to individual-level tax records of the entire Danish population over the course of nearly three decades, we’ve been able to get their levels of income, spending, assets and debts. This amounts to some 70 million individual observations between 1987 and 2014.

By looking at information such as salaries, share dividends, costs of debt, deposits, value of stocks and houses, and spending (via a record of car purchases), we’ve established a clear idea of how families across economic spectrum fare when rates rise and fall.

There are some clear winners and losers. When rates fall, disposable income rises for high and low earners, but it’s households within the top one per cent of income who benefit most. We found a one percentage point drop in interest rates boosted the incomes of these top earners by five per cent over two years, while the lowest earners saw only a 0.5 per cent rise. Those in the middle saw an increase of 1.5 per cent in their income.

What is going on?

While lower rates do indeed boost employment, particularly among people with lower incomes, these higher earnings are eclipsed by the benefits the better off enjoy, in terms of healthier share dividends, better business income and cheaper interest costs.

We witness a similar imbalance if we examine the impact of lower rates on the value of assets such as property and stocks. Again, cheaper money brings gains across the board, but these are more pronounced among the better off. A similar rate drop over two years boosts the value of assets such as property by 20 per cent of disposable income among poorer families, but by 75 per cent at the top of the scale. Lower rates have a larger impact upon the value of assets than they do upon disposable income – and the wealthier have more financial and real assets.

When rates fall, disposable income rises for high and low earners, but it’s households within the top one per cent of income who benefit most

We also find younger people get the rough end of the deal. In terms of income, middle-aged households are more likely to be self-employed and have more debt. Lower monetary policy rates mean they earn more, have access to cheaper finance and better business benefits than their younger and older counterparts. In terms of wealth, the elderly are more likely to have investments and property portfolios, and hence benefit the most.

In order to ensure our readings are accurate, we used this data to model the results of a similar easing of rates – and the results backed up our findings. Our exercise showed lower rates boost disposable income for the wealthiest by some 3.5 per cent over two years, but for the lowest on the rung, incomes fall by nearly two per cent.

Interest rates – monetary policy – are one of the main methods that central banks possess to try to prevent entrenched inflation and ensure a robust economy. But this data dispels the fantasy that lower rates make for a balanced economy where everyone benefits – rather they serve to increase than reduce inequality.

This article draws on findings from "Monetary Policy and Inequality" by Asger Lau Andersen (University of Copenhagen), Niels Johannesen (University of Copenhagen), Mia Jørgensen (University of Copenhagen) and José-Luis Peydró (51�Թ�� London).

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What global climate change models are missing

Enrico Biffis — Wed, 24 Aug 2022 13:15:58 +0000

What global climate change models are missing

Enrico Biffis Wed, 24/08/2022 - 13:15

25 August 2022

Researchers from 51�Թ�� Business School and the Singapore Green Finance Centre have used machine learning to combine data to understand the climate change risk at a local level

We know climate change will have a drastic impact upon the planet in the decades to come; worst-case-scenario global climate models predict rising seas, extreme heat and fiercer storms. But are these large-scale and complex models too blunt a tool to show how regions and countries will fare? Could we be doing a better job?

What are the current global climate models?

Global models are the main method scientists use to understand how climate may change in the future. But if these models don’t delve into enough physical detail at a local level, are small coastal communities and nations with microclimates and varied geography subject to inaccurate projections – and unfairly penalised by investors and insurers? Or if global models fail to flag urban hotspots where temperatures will soar high above regional averages, are we missing an opportunity to mitigate unforeseen climate shocks and save lives?

Using machine learning to build climate change models

What’s missing is a more in-depth understanding that could inform markets, investors and vulnerable communities. Using advances in computing muscle, we’ve created some science-based tools that allow a tighter analysis – and the results are surprising. We’ve focused on a group of countries in South East Asia, in a piece of research supported by the Singapore Green Finance Centre.

We’ve deployed machine learning to combine data from the most up-to-date global climate projections with information about regional topography and microclimates, and historical weather patterns. This has allowed us to disentangle data formerly lumped together to produce blanket national climate risk scores. Using these tools, what appears on a national map as a uniform risk, we now understand in finer resolution.

And this analysis has thrown up some results that differ significantly from those projected by global models – not only in average climate risks but also in the likelihood and severity of extreme events, such as rainfall, coastal flooding and typhoons. In some cases, global models overestimate these risks, and in others, they’re too optimistic.

Looking at results from new climate change models

For this research, we focused on four countries: Indonesia, Malaysia, the Philippines and Thailand. These are nations with densely populated coastlines, and renowned for extreme rainfall driven by local monsoons. We looked at projections for temperature, wind speeds, rainfall and coastal surges.

Our analysis reveals the impact of global warming will be uneven, even at a local level. Global projections of rainfall in urban areas might be out by as much as 100 per cent, while temperature forecasts might differ by 80 per cent in some areas. We know how different modelling choices may result in wildly different future outcomes, but the local variations documented here pertain to individual models and are invisible in the coarser modelling. Rainfall, which is driven in this region by fluctuating local monsoons, is particularly difficult to forecast.

By design, climate models tend to be global: weather patterns require long horizons to be understood, and it’s extremely challenging when formulating future scenarios to look at individual geographies. But we have managed to examine the impact of climate change to a within a square kilometre and our tools can reveal even greater detail by using more computational power.

In some cases, global models overestimate these risks, and in others, they’re too optimistic

We use machine learning to explore a vast amount of data, including the lie of the land. A local hill or mountain range can shelter land from wind and hold up the clouds, for instance, while tree cover can lower urban temperatures. From these findings, we’ve been able to reconstruct a national average risk, as well as a better understanding of potential for climate extremes. Translated, this means we can identify whether floods or high winds are more likely to the north or south of a nation, for instance. This robust analysis could also be applied to other parts of the world with different geographies.

There are many private risk assessors that produce country-specific forecasts for the marketplace, but their methods are mostly opaque and there’s often a lack of detail or understanding of how they’ve reached their results. Countries and regions need robust and open information – that’s what these science-based tools can achieve. Our methodology can be fine-tuned and applied at scale; we want to advance the science of climate projections.

Using our model for climate change research

At 51�Թ�� Business School, there’s scope to collaborate with the wider scientific community to look at broader applications. Our model can be integrated with other climate science research to reveal in greater depth how risks of other climactic events will change, improving our understanding of the risk of wildfires, drought and flooding. In Indonesia, for instance, peat fires can release dangerously high levels of carbon; knowing the economic and climate risks here could have an impact on our willingness or ability to curb emissions.

In other work, we’ve directed our methods for risk assessment towards one of the most natural methods of capturing carbon: forests. Working with US-based startup Terraformation, we aim to assess the efficacy of forests at drawing down carbon and as potential assets for firms wishing to invest in carbon-based resources. We hope to lower the barriers to financing initiatives to restore forests around the world.

Economic impacts are only part of the story. By using a range of state-of-the art tools across different disciplines, we can build a more detailed and integrated picture and make the most of opportunities to act and mitigate climate impacts. Knowledge of what the world might look like in the face of climate change is in everyone’s interest.

This article draws on findings from "Downscaling of Physical Risks for Climate Scenario Design" by Enrico Biffis (51�Թ�� Business School) and Shuai Wang (Princeton University).

Sustainability and climate change

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To meet sustainability goals, our future power systems will need to change dramatically over the next 50 years and the right solution is critical to shaping policy

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Phasing out coal would save the world $78 trillion

Patrick Bolton — Wed, 10 Aug 2022 12:35:01 +0000

Phasing out coal would save the world $78 trillion

Patrick Bolton Wed, 10/08/2022 - 12:35

10 August 2022

51�Թ�� Business School researchers find the move would save 1.2 per cent of current world GDP every year until the end of the century

The heatwave that hit India and Pakistan earlier this year put “unprecedented pressure on power demand in India and Pakistan, where people... had to endure hours of cuts amid the crippling heat. On Friday [29 April], peak demand in India touched an all-time high of 207,111 MW,” according to official figures reported by The Guardian.

It is a tragic irony that India’s and Pakistan’s immediate response to this period of extreme heat has been to expand electricity production from coal-fired power plants, which can only worsen the intensity of future heat waves.

How can we stop this infernal cycle of increased energy demand leading to more carbon emissions and a hotter planet? As hard as international negotiators have tried to reach an agreement to phase out coal (and despite the promise of a historic breakthrough at the COP26 in Glasgow), so far, all attempts to get the world to phase out coal have failed. More recently, in response to the war Russia started against Ukraine, even the countries that had given up on coal have been revising their stance.

Phasing out coal is a source of economic and social gain

The most common concern voiced with phasing out coal is that it would be too costly. We are told replacing coal with renewable energy would be too expensive. We have undertaken a systematic quantitative analysis of this claim and obtained a baseline estimate that phasing out coal would bring the world a net total gain of £77.89 trillion. This represents around 1.2 per cent of current world GDP every year until 2100. We call this the “Great Carbon Arbitrage”.

The flaw with the argument that phasing out coal is too costly is it ignores the benefits from lower carbon emissions. These benefits are real economic gains in terms of lower expected physical damages from climate change, leaving aside all the attendant benefits to economic activity and innovation the investments in renewable energy will bring.

A global agreement to phase out coal was not reached at the COP26; the 197 parties of the convention could only agree on accelerating independent efforts towards the phase-down of unabated coal power. But what is needed is a far more ambitious agreement to phase out coal that links investments in renewable capacity to replace coal, along with financing of these investments, and compensation of coal companies for lost profits.

Conditional climate financing for phasing out coal and phasing in renewables

A broad policy implication from our analysis is that, if compensation were built into an agreement to phase out coal, and if the promised transfers for green investments to developing countries were to be made conditional on phasing out coal, the social gains from such an agreement would still be enormous, and the agreement would be far more likely to succeed.

To gain further insight into the size of transfers that may be required to pay for the replacement of coal with renewable energy, we break down where these costs would be incurred by region. We find the present value of total conditional climate financing needs to end coal globally are around $29 trillion, in line with renewable investment needs estimated in other studies.

This represents an annual global climate financing need between $0.5 trillion and $2 trillion, with a front-loaded investment this decade, which we estimate to be up to $3 trillion. Investment costs for the developed world to cover these global annual climate financing needs would be in the range of 0.5 per cent to 3.5 per cent of wealthy countries’ GDP.

A public-private partnership to end coal

This clearly represents a major challenge. But our analysis shows the social gain from these investments far exceeds the cost. Some prominent commentators have argued no government in the world has enough money to make such sizeable investments and have called on the private sector to steer the required funding to renewable energy investments.

Most of the funding for these investments can indeed come from the private sector, but a significant amount of public money to enhance them will still be needed. If, for every dollar of public funds, nine dollars of private financing could be tapped through blended finance arrangements, the overall strain on public finances would not be inordinate. And when one considers the large social benefits to be gained from phasing out coal, it doesn’t seem like an unreasonable cost at all.

This article draws on findings from "The Great Carbon Arbitrage" by Tobias Adrian (International Monetary Fund), Patrick Bolton (51�Թ�� London) and Alissa M. Kleinnijenhuis (Stanford University).

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Agribusiness is not ready for the sudden shocks of climate change

Climate change models suggest temperatures will gradually rise, but the agriculture sector is not prepared for the acute risk of extreme weather events

Phasing out coal could generate "social benefits" worth $78 trillion

Replacing coal with renewable energy would greatly benefit society, according to a new working paper from 51�Թ�� Business School.

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