Journal
JOURNAL OF ENVIRONMENTAL MANAGEMENT
Volume 342, Issue -, Pages -Publisher
ACADEMIC PRESS LTD- ELSEVIER SCIENCE LTD
DOI: 10.1016/j.jenvman.2023.117991
Keywords
Water risk Water risk management Water risk models
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Climate change has worsened water risk events, posing a threat to water security for societies and ecosystems. Existing water risk models primarily focus on geophysical and business-related impacts, neglecting the monetary aspects of water-related challenges and opportunities. This study aims to bridge this gap by exploring objectives and directions for modeling financial water risk. By recognizing the interplay between climate and water, as well as the systemic nature of water risk, this study advocates for forward-looking, diversification-based, and mitigation-adjusted modeling approaches.
Climate change has intensified water risk events, threatening water security for societies and ecosystems. Although current water risk models focus on geophysical and business-related effects, they do not quantify the monetary dimensions of water-related challenges and opportunities. This study aims to address this gap by exploring the objectives and directions for modeling water risk in finance. We identify requirements for adequately modeling financial water risk, assess existing water risk approaches in finance, outline their benefits and shortcomings, and develop directions for future modeling. Recognizing the interplay between climate and water as well as the systemic dimension of water risk, we emphasize the need for forward-looking, diversification-based, and mitigation-adjusted modeling approaches.
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