Meet Riccardo Rebonato, a fusion of science and finance
As EDHEC Professor and Scientific Director of the EDHEC-Risk Climate Impact Institute, Riccardo Rebonato is responsible for finding innovative but practical ways of tackling the greatest challenge of our age. His work at EDHEC and the Institute is the culmination of a lifetime spent bringing together the skills, knowledge and experience he believes are needed to tackle climate change. Indeed, with an original career and an impressive list of (various) publications, he is no stranger to thinking “outside the box”…
- This text has been published initially in the EDHEC Vox Mag #14, “Pioneering Sustainable Finance” (Dec. 2023)
“Physics is like a jealous lover”
Riccardo Rebonato’s path to becoming the Scientific Director of EDHEC-Risk Climate Impact Institute may be unconventional, but the insights his unique experience have given him mean he is better equipped than most to research ways society – and the finance sector in particular – can fight the climate crisis.
“I was a nuclear scientist originally, but once I had completed a couple of PhDs and a post-doc I finally realised physics could manage perfectly well without me”, says Professor Rebonato. “I still wanted to apply my quantitative skills, and luckily this is just what finance needed in the 1990s, because complex derivatives were starting to become important. I was just the right person at the right time: I started out as a financial modeller, but ended up as head of trading, risk management and research.”
Eventually, he decided he wanted to get back into academia. But it proved more difficult than he had imagined. “Physics is like a jealous lover”, he jokes. “If you leave, you won’t get welcomed back!” Alongside his professional activities, he wrote books and academic articles in finance (1), and this allowed him to join EDHEC Business School in 2015.
Separating the plausible from the pie in the sky
His work at the Institute (2) is the culmination of a lifetime gathering the skills, insights and experience he believes are necessary to fight climate change. His scientific background means he is in a strong position to understand and evaluate proposed technologies, while his economics expertise gives him an understanding of the ethical and financial elements of the challenge.
“It’s such a rich, fascinating problem”, he says. “It’s technical, but it also impacts every single aspect of society – and it’s not just intellectual: it’s affecting every one of us, every day.”
“Tackling climate change is a war effort”
Tackling climate change is, according to Riccardo Rebonato, a challenge demanding the same level of response as a war effort: a dramatic shift towards investing resources in climate solutions. And, he believes, climate investment, which must be facilitated and channelled by a finance made fit for the needs of the 21st-century, holds the key to making it happen.
“If we are going to beat climate change, the necessary expenditure will be on a par with what we spend on education, healthcare and defense, and we’re currently an order of magnitude behind where we need to be.” Though Professor Rebonato has recently been awarded the Quant Researcher of the Year 2022 lifetime award in recognition of his work in financial risk management (3), and considers the prize a great honour, he is not content to rest on his laurels. With the help of his team, he wants to find the most effective ways to tackle climate change. “Exactly because the problem is daunting”, he says, “we must find the solutions that give us the maximum bang for every buck.”
What’s next?
EDHEC’s Climate Impact Institute is educating a new generation of financial professionals who combine enthusiasm and intelligence with intellectual rigour, even in this emotive area. “It’s important that we don’t approach a problem like this as advocates. We shouldn’t be looking to have our ideas confirmed.” “Instead we should always be happy to be surprised or proved wrong. Because what matters is that someone, eventually, is right.”
Riccardo Rebonato wants to add to the understanding of the finance and economics of climate change, and how to make the transformation to a truly sustainable economy happen. “Finance and economics are all about efficiency”, he says, “and a challenge of this size can only be managed if we are efficient. We have no time to waste: I want to play my part.”
References
(1) See Professor Rebonato's Google Scholar profile: https://scholar.google.com/citations?user=IbmQljsAAAAJ&hl=en
(2) Notably his management of the research programme "Impact of Climate Change on Asset Prices and Investment Management"
(3) Pr. Riccardo Rebonato named "PMR Quant Researcher of the Year" for 2022, EDHEC, March 2023
