Effects of Climate Risk on Corporate Default Risk: Analyzing the Impact Mechanisms of Physical Climate Risks and Environmental Policies Scope and Background Climate change poses significant risks to businesses worldwide, with potential impacts that can be classified into three main categories: physical risks, transitional risks, and liability risks. Physical risks include immediate threats from extreme weather events and long-term changes such as sea level rise. Transitional risks arise from regulatory and policy changes aimed at mitigating climate impacts, while liability risks stem from failures to comply with evolving legal expectations and standards. The financial stability of firms is directly affected by these risks, as they impact cash flows, capital, and overall solvency. According to the Intergovernmental Panel on Climate Change (IPCC, 2021), climate change is expected to result in severe weather events and significant environmental transformations, leading to substantial economic losses across various sectors. Martinich and Crimmins (2019) estimate that the U.S. alone could face a loss of USD 520 billion due to global temperature rise. This study aims to explore the extent to which climate risks, specifically physical risks like extreme weather events and sea level rise, are reflected in corporate default risk. Relevance to Research Line(s) This research aligns with the broader field of environmental finance and climate economics, contributing to the understanding of how environmental policies and extreme weather events influence corporate financial health. It seeks to expand the theoretical framework by integrating environmental risks into corporate default risk analysis, enhancing methodologies for assessing climate-related financial impacts. 4. Problem that must be investigated Problem Statement The primary objective of this research is to analyze the extent to which physical climate risks, such as extreme weather events and sea level rise, are captured by firms’ default risk. Additionally, the study will investigate whether firms’ environmental policies and behavior moderate the transmission of these climate risks into default risks. We will consider different scenarios of physical risk, as well as different horizons. Moreover, we will take into account physical risk as an aggregate measure but also distinguish by types of physical risk. Since the literature contains several measures of credit risk, we will study whether the impact of physical risk is similar for all the measures or if, contrary to this, there are some differences, and if so, what the reasons are. Finally, we will take into account different categories of firms, depending on the industry, country, level of profitability, solvency, etc. Key Questions 1. How do different types of physical climate risks, such as extreme weather events and sea level rise, impact firms’ credit risk? 2. Do firms’ environmental policies and behavior mitigate the transmission of physical climate risks to their default risk? 5. Study design Research Design To address these questions, I will employ a quantitative research approach using firm-level data from reputable sources such as Eikon-Refinitive and S&P Capital IQ Pro databases. Data will include firms of different countries and industry. The dependent variable will be firms’ credit risk, measured by using alternative measures, depending on the availability of data and the suitability of the credit-risk measure. Independent variables will include the scores for physical risk, and firm-specific characteristics such as environmental data, as well as size, leverage, profitability, and geographical diversification. Methodology The analysis will involve sophisticated statistical tools such as R and Stata for regression analysis and hypothesis testing. Panel data analysis techniques, including random effects, fixed effects, and instrumental variable estimates, will be used to address potential endogeneity and unobserved heterogeneity. We will also use Matlab to apply some models for assessing credit risk. Data Collection The study will cover a significant sample period to capture variations caused by major climate events and regulatory milestones. Data will be sampled annually or quarterly to maintain statistical power and ensure meaningful analysis. Potential issues with missing data, database integration, and data cleansing will be systematically addressed. As already mentioned, the information will be obtained from different databases, available through the research project linked to the doctoral application. 6. Importance/Need of the study Significance This research is crucial for advancing the field of environmental finance and enhancing our understanding of the financial implications of climate risks. Previous research is made mainy with data of climate events, that is, realized events. Instead, in this project we start from physical risk, quantified by aggregate indexes. Investigating how physical climate risks affect corporate default risk, this study provides valuable insights for policymakers, financial analysts, and corporate managers to develop effective risk management strategies. The findings will contribute to the theoretical framework by integrating environmental risks into credit risk analysis and inform sustainable financial practices. Practical Implications Upon completion of this research, we will have a deeper understanding of how climate-related risks influence corporate solvency. This knowledge will aid in improving risk management tactics, advising investors, and shaping regulatory compliance, ultimately leading to a more resilient and informed financial landscape. References Intergovernmental Panel on Climate Change (IPCC). (2021). Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Masson-Delmotte, V., et al.]. Cambridge University Press. Martinich, J., & Crimmins, A. (2019). Climate damages and adaptation potential across diverse sectors of the United States. Nature Climate Change, 9, 397– 404. https://doi.org/10.1038/s41558-019-0444-6 Nguyen, Q., Diaz-Rainey, I., and Kuruppuarachchi, D. (2023). In search of climate distress risk. International Review of Financial Analysis, 85 (2023): 102444. Zurich (2021). Here’s how climate change will impact businesses everywhere – and what can be done. Retrieved from www.zurich.com.  这是我的研究计划 要怎么修改 ？ 下面是我要申请学校的要求PhD fellowship in Environmental Economics
Department of Food and Resource Economics invites applicants for a PhD fellowship in Environmental Economic Land Use Modelling. The PhD project will support the research project “New Forests, new values new places [Nye skove, nye værdier, nye steder]”, which is financed by the Villum Foundation

The position is open from February 1st 2025 or as soon as possible thereafter.

The project
Over the coming decades, the Danish government has the ambition to increase the forest area by 250,000 hectares to meet a number of strategic environmental and climate goals. It is currently unknown how the areas will be selected and how to prioritise between different objectives such as climate change mitigation, biodiversity conservation, water quality improvements in coastal waters and protection of ground water resources. Integrated Environmental Economic models are useful tools to conduct scenarios for different strategies and explore their implementation. The PhD will further develop existing national scale models to improve their robustness for policy design.

The PhD will improve the existing national scale economic model (TargetEconBES) to allow more targeted scenario development for afforestation strategies. This will require integration of new data sources and close interaction with experts from different environmental science domains.

It is envisaged, that the project will enhance the methodologies to evaluate alternative land use scenarios and produce an overall analysis of the value of establishing new forests in different places in Denmark. Through spatially explicit environmental economics modelling, the project will integrate data on the current land use, the economic and environmental values of alternative uses, and develop landscape level scenarios to identify where new forests could achieve significant environmental benefits in cost effective ways.

Who are we looking for?
We are looking for candidates within the field(s) of environmental and agricultural economics. In particular, we are looking for candidates with prior experience in economic modelling related to environment, agriculture and natural resources. Experience with GAMS or other operations research software, ArcGIS and R will be an advantage.

Our group and research - and what do we offer?
We are a group of environmental economists working on agri-environmental economics and policy. We cut across to larger units in the Department which focus on environment and natural resources, and production, markets on policy, respectively.

Both units are a part of the Department of Food and Resource Economics, Faculty of SCIENCE, University of Copenhagen. We are located in Copenhagen.

We offer creative and stimulating working conditions in dynamic and international research environment. The department currently has about 50 PhD students.

Principal supervisor is professor Mette Termansen,  Department of Food and Resource Economics, E-mail <PRESIDIO_ANONYMIZED_EMAIL_ADDRESS>, Direct Phone: <PRESIDIO_ANONYMIZED_PHONE_NUMBER>.

The PhD programme
A three year full-time study within the framework of the regular PhD programme (5+3 scheme), if you already have an education equivalent to a relevant Danish master’s degree. ********************************************************************************

Qualifications needed for the regular programme
To be eligible for the regular PhD programme, you must have completed a degree programme, equivalent to a Danish master’s degree (180 ECTS/3 FTE BSc + 120 ECTS/2 FTE MSc) related to the subject area of the project, e.g. [Environmental Economics or Agricultural Economics]. For information of eligibility of completed programmes, see General assessments for specific countries and Assessment database.

Terms of employment in the regular programme
Employment as PhD fellow is full time and for maximum 3 years.

Employment is conditional upon your successful enrolment as a PhD student at the PhD School at the Faculty of SCIENCE, University of Copenhagen. This requires submission and acceptance of an application for the specific project formulated by the applicant.

Terms of appointment and payment accord to the agreement between the Danish Ministry of Taxation and The Danish Confederation of Professional Associations on Academics in the State. The position is covered by the Protocol on Job Structure.

Responsibilities and tasks in both PhD programmes

Carry through an independent research project under supervision
Complete PhD courses corresponding to approx. 30 ECTS / ½ FTE
Participate in active research environments, including a stay at another research institution, preferably abroad
Teaching and knowledge dissemination activities
Write scientific papers aimed at high-impact journals
Write and defend a PhD thesis on the basis of your project
We are looking for the following qualifications:

Professional qualifications relevant to the PhD project
Relevant publications
Relevant work experience
Other relevant professional activities
Curious mind-set with a strong interest in environmental economics
Good language skills
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Application and Assessment Procedure

 Your application including all attachments must be in English and submitted electronically by clicking APPLY NOW below.

Please include: 

Motivated letter of application (max. one page)
Curriculum vitae including information about your education, experience, language skills and other skills relevant for the position
Original diplomas for Bachelor of Science or Master of Science and transcript of records in the original language, including an authorized English translation if issued in another language than English or Danish. If not completed, a certified/signed copy of a recent transcript of records or a written statement from the institution or supervisor is accepted.
Publication list (if possible)
Reference letters (if available)
Application deadline
The deadline for applications is 1 November 2024, 23:59 GMT +1.

We reserve the right not to consider material received after the deadline, and not to consider applications that do not live up to the abovementioned requirements.

The further process
After deadline, a number of applicants will be selected for academic assessment by an unbiased expert assessor. You are notified, whether you will be passed for assessment.

The assessor will assess the qualifications and experience of the shortlisted applicants with respect to the above mentioned research area, techniques, skills and other requirements. The assessor will conclude whether each applicant is qualified and, if so, for which of the two models. The assessed applicants will have the opportunity to comment on their assessment. You can read about the recruitment process at https://employment.ku.dk/faculty/recruitment-process/.

Interviews with selected candidates are expected to be held in the end of November 2024.

Questions
For specific information about the PhD fellowship, please contact the principal supervisor.

General information about PhD study at the Faculty of SCIENCE is available at the PhD School’s website: https://www.science.ku.dk/phd/.

The University of Copenhagen wishes to reflect the surrounding community and invites all regardless of personal background to apply for the position. 

Part of the International Alliance of Research Universities (IARU), and among Europe’s top-ranking universities, the University of Copenhagen promotes research and teaching of the highest international standard. Rich in tradition and modern in outlook, the University gives students and staff the opportunity to cultivate their talent in an ambitious and informal environment. An effective organisation – with good working conditions and a collaborative work culture – creates the ideal framework for a successful academic career.
我需要怎么修改我现有的research proposal