Presentation by Kris de Meyer UCL Climate Action Unit OECD INSPIRE Workshop Bio Risks impacts and dependencies in the financial sector

1. Different Lenses on Risk
OECD INSPIRE - 04 April 2023
Kris De Meyer

2. Why those questions?
How did we answer them?

3. No right or wrong answers – just differences
...with consequences

5. “Our results show that at least 10 to 30 variants of word meanings exist for
even common nouns.
Further, people are unaware of this variation, and exhibit a strong bias to
erroneously believe that other people share their semantics.”
Marti et al. 2023 Open Mind https://doi.org/10.1162/opmi_a_00072
A data point from the wider science evidence base

6. avoiding raising
false alarms
avoiding
something
slipping through
the net

8. In the world of climate and environmental
science, 'risk' is usually understood as the
threat of bad things happening.
Although it is understood that some of
these risks are quantifiable, there is no
expectation that they should be.
In fact, it is assumed that many of the
threats posed by climate change and
biodiversity loss are not quantifiable – at
least not until after the fact.
In the world of economics and finance,
'risk' is traditionally understood as a
probability measure over a range of
outcomes, multiplied by losses / gains.
The range of outcomes usually includes
both good and bad outcomes.
There is an implicit expectation that risks
are quantifiable. If it can't be quantified,
it is usually called 'uncertainty'.
Different meanings of 'risk' in science and economics

9. This problem can't be defined away

10. Ask yourself the question – which 'risk lenses'
are speakers/listeners using?
RISK
Purple lens
"unquantifiable
threats and dangers
of climate change
and biodiversity loss"
Yellow lens
"quantifiable
gains and losses
of climate change
and biodiversity loss"

11. When scientists say 'these risks are unquantifiable'
do they really mean 'unquantifiable'
or do they mean
'not quantified now but quantified soon'?

12. What does that mean for 'cost-benefit analysis'?
Portfolio risk management?

13. For more information, visit:
www.ucl.ac.uk/climate-action-unit
To contact us, email:
climateactionunit@ucl.ac.uk
Connect on Twitter:
@UCL_CAU