Introducing EDHEC Climate Institute: a new interdisciplinary hub for climate research and action

As the world just experienced its warmest January on record globally (Copernicus EU), recent events reminded us that the urgency to establish climate agenda has never been more pressing. Extreme weather events are making headlines worldwide, from Storm Éowyn in Scotland, which left approximately 117,000 homes without power, to the devastating wildfires in Southern California, which erupted unexpectedly outside the typical fire season.

On the other hand, the intention of countries like the United States and Argentina to withdraw from the Paris Agreement raises concerns about the future of global climate commitments. Despite this, several high-emission industries remain vulnerable to increasing regulatory, technological and market risks. Sectors such as transport (air transport and maritime transport through, for example cruise ships), heavy industry (steel and cement production), and agriculture face mounting pressure due to their high carbon intensity. Stricter emission regulations, carbon pricing mechanisms, and shifting consumer preferences are likely to impact these industries, forcing them to adapt or face economic and operational challenges.

EDHEC Climate Institute: A New Initiative for Climate Research

The EDHEC Climate Institute (ECI) follows the long-standing research tradition of the EDHEC Business School and represents a collective effort to address the pressing challenges of climate change by promoting interdisciplinary research with a more integrated vision, drawing on historical expertise in climate finance while leveraging new complementary fields to produce concrete insights and applications.

On the trail of EDHEC-Risk Institute and EDHEC-Risk Climate Impact Institute (1), the recently formed EDHEC Climate Institute addresses the diversity of climate change-related topics and is committed to providing society with transparent, evidence-based insights that can guide businesses, policymakers, and communities toward informed and effective climate action. 

By focusing on scientific solutions rather than ideological debates (2), we can align the diversity of stakeholders, governments, corporations, investors, and the general public toward a common goal: building a more resilient, sustainable future for all.

A Research Agenda Built on Three Pillars

EDHEC Climate Institute aims to address the complexity of climate risks focusing on three fundamental pillars: Financial Value of Climate Risk, Research Beyond Climate Finance and Climate Regulation and Policies.

Financial Value of Climate Risk

The first axis is related to climate finance which aims to quantify the financial risk related to climate, whether it concerns the risks related to the transition toward a low-carbon economy (transition risk) or the physical risks (impacts of extreme weather events and climate change).

It is based on EDHEC traditional expertise and on the interaction between teams working on specific asset types (infrastructure (3), corporate, real estate) and climate experts working on transversal topics such as climate scenarios (4), physical risks, transition risks. Adaptation and mitigation of climate change are also key topics. C-TECH team with its civil engineering background develops high-level databases with the resilience and decarbonization strategies specific to different sectors as well as the underlying measures and technologies (5). This also fed the other research developments.

Research Beyond Climate Finance

This axis is a key challenge for the institute which will aim to develop research on climate beyond our traditional financial expertise considering local initiatives and sponsors. It focuses on biodiversity and the innovative assessment of physical risks at a geo-sectoral granular level (6). 

ECI research will leverage on the use of high-resolution spatial data, including satellite data and climate models and AI (Natural Language Processing, Machine Learning, and Large Language Models) complemented by a commitment to high-quality scientific research.

Climate Regulation and Policies

The third axis aims to address understanding the evolving landscape of climate regulation and policies in 2 directions: by analyzing existing regulatory frameworks and developing strategies to support the effective implementation of solutions and compliance; and by exploring the impact of climate policies on industries, economies, and societies, providing insight / feedback for decision makers (7).

Major Research Challenge

There are main research topics that the Institute aims to address, they are presented in continuation.

#1: Assessing Transition Risk Beyond Scope 1 and 2

Transition risk is traditionally evaluated using Scope 1 and Scope 2 emissions, which correspond respectively to direct carbon emissions and emissions associated with electricity consumption. The assessment is often monetarized considering a carbon tax, which is seen as a proxy to represent climate transition pressures. However, this approach can be misleading in certain cases.

For instance, consider the shift from fuel to electricity in specific sectors. The electrification of port operations—where ships are required to use onshore electricity instead of fuel—may lead to an increase in Scope 2 emissions but a reduction in overall carbon output, particularly in Scope 3. Similarly, charging electric vehicles increases Scope 2 emissions but contributes to long-term emissions reductions and climate change mitigation. Additionally, certain industries, such as airports and ports, particularly those serving cruise ships, face significant transition risks as they are highly sensitive to consumer behavior and regulatory shifts.

Scope 3 emissions encompass indirect emissions from upstream activities (such as raw material sourcing and production) and downstream activities (notably the use and disposal of products). It is therefore a key measure to properly assess transition risk. These emissions are notoriously difficult to measure and often underreported, despite representing the largest share of climate-related risk.

Technology plays a central role in decarbonization efforts, yet a key question remains: Are the proposed technological solutions truly effective, or are they merely greenwashing? Assessing the actual efficiency of these innovations is crucial to ensure meaningful climate action rather than superficial compliance.

#2: Probabilistic Approaches to Climate Scenarios

Climate scenarios are built on a set of hypotheses and assumptions, serving as projections rather than definitive forecasts. The absence of probability assignments to these scenarios limits their practical utility for decision-making, as it remains unclear how likely any given scenario is (4). To enhance the relevance of climate scenarios, there is a pressing need to incorporate probabilistic approaches. Attaching probability distributions to different projections would enable better implement climate risk measures without considering the worst scenario for each risk type, considering a “stress-test” approach.

Furthermore, another key limitation of current climate economic models, such as Integrated Assessment Models (IAMs), is their lack of sectoral granularity. While these models capture broad economic and climate interactions, they often fail to provide precise geo-sectoral insights (6).

Different industries and regions will experience climate risks in highly specific ways, and a one-size-fits-all approach can lead to misleading conclusions. Addressing this gap requires more detailed sectoral modeling, ensuring that transition and physical risks are adequately captured across industries and geographies.

#3: The Geosectoral Impact of Physical Climate Risks

Physical climate risks do not resume the direct damage they cause. Their ripple effects can have significant indirect consequences at both national and regional levels, disrupting global supply chains and economic stability.

Local damage can lead to larger scale impacts. For instance, the 2011 floods in Thailand severely disrupted the semiconductor supply chain, affecting electronics industry worldwide. More recently, severe flooding in Valencia, Spain, delayed the delivery of Lausanne’s new tram system in Switzerland by Stadler which has its largest manufacturing site in Valencia. While the company only suffered light damage, operations were disrupted due to 20% of workers unable to commute to the site, and the local supplier unable to deliver essential components. As a result, the tram delivery was postponed from 2024 to 2025 and it led to a 20% drop in its stock value.

ECI current research effort aims to include these meso and macro-economic levels impacts considering the relative vulnerability of the different sectors and the supply chain. It is also following the current effort of improving the granularity and quality of physical risks local impact assessment (6).

Translating Research into Public Awareness and Action

One of the core missions of ECI is to ensure that climate research does not remain confined to academic circles but is actively translated into actionable insights for policymakers, businesses, and the public. For this reason, ECI is committed to applied research, focusing on real-world solutions (8) to be able to make an impact.

Scientific research on climate related risks is often highly technical, making it challenging for the general public, businesses, and policymakers to interpret and implement findings. ECI aims to ensure that scientific discoveries are effectively communicated in a practical and clear way. It aims to engage with policymakers, raise public awareness and build knowledge across various sectors and society so the EDHEC Climate Institute research can truly make an impact.

A key barrier to effective climate action is the lack of transparent, standardized, and easily accessible data. ECI is committed to promoting open-access data platforms, ensuring that climate-related research, financial risk models, and adaptation strategies are available to all relevant stakeholders.

References

(1) Why EDHEC Business School is a major player in Sustainable Finance (2024) EDHEC Vox. Noël Amenc, Frédéric Blanc-Brude, Frédéric Ducoulombier, Emmanuel Jurczenko, Emmanuel Métais - https://www.edhec.edu/en/research-and-faculty/edhec-vox/why-edhec-business-school-major-player-sustainable-finance

(2) 3 questions to Noël Amenc (EDHEC Climate Institute): will there be a climate problem again with Donald Trump’s new mandate? (2025) EDHEC Vox. Noël Amenc - https://www.edhec.edu/en/research-and-faculty/edhec-vox/3-questions-noel-amenc-edhec-climate-institute-will-there-be-climate-problem-again-with-trump-new-mandate

(3) Climate change: Why are infrastructure investors aware of the risk while failing to measure it? (2024) EDHEC Vox. Noël Amenc, Frédéric Blanc-Brude and Alice James - https://www.edhec.edu/en/research-and-faculty/edhec-vox/climate-change-infrastructure-investors-aware-risk-while-failing-to-measure-it

(4) The problems with climate scenarios, and how to fix them (2024) EDHEC Vox. Riccardo Rebonato - https://www.edhec.edu/en/research-and-faculty/edhec-vox/problems-climate-scenarios-and-how-fix-them

(5) Rob Arnold (EDHEC-Risk Climate): "Investors are seeking more transparency on risk assessment and actions taken to improve the sustainability of infrastructure" (2024) EDHEC Vox. Rob Arnold - https://www.edhec.edu/en/research-and-faculty/edhec-vox/rob-arnold-edhec-risk-climate-investors-are-seeking-more-transparency-risk-assessment-actions-improve-sustainability-infrastructure

(6) Nicolas Schneider: "For investors and industries, more granular information on physical risk impacts means a better adaptability to future shocks" (2025) EDHEC Vox. Nicolas Schneider - https://www.edhec.edu/en/research-and-faculty/edhec-vox/nicolas-schneider-investors-industries-granular-information-physical-risk-impacts-better-adaptability

(7) Finance of transition, transition of finance (2024) EDHEC Vox. Frédéric Ducoulombier - https://www.edhec.edu/en/research-and-faculty/edhec-vox/finance-of-transition-transition-of-finance

(8) Noël Amenc: « We provide finance decision-makers not only with research results but also with accurate tools and concrete solutions » (2024) EDHEC Vox. Noël Amenc - https://www.edhec.edu/en/research-and-faculty/edhec-vox/noel-amenc-we-provide-finance-decision-makers-research-accurate-tools-concrete-solutions