Climate Change as a Risk Management Problem: How to Price the Risk

Hear from pioneering risk manager Bob Litterman as we discuss the importance and challenges of properly pricing the risks from climate change

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During the course of this inaugural series of the climate risk podcast, we have explored numerous perspectives on the pressing issue of climate change. That has included hearing from the insurance sector, boards, academia and more. To round out this first series of climate interviews we are returning to what GARP is best known for, financial risk management, by examining the issue of pricing the risks from climate change. We speak with Bob Litterman, a celebrated risk manager who has been actively involved with climate change issues for more than a decade.

Today’s episode covers:

  • Understanding emissions as a negative externality and the failure to price carbon appropriately
  • Aligning financial incentives with the transition to a low-carbon economy
  • The CFTC’s report on Managing Climate Risk in the U.S. Financial System
  • The value and limitations of scenario analysis as a tool for assessing climate risk

If you have any questions, thoughts or feedback regarding this podcast series, we would love to hear from you. Please email us at:


Links from today’s discussion:

CFTC Report – Managing Climate Risk in the U.S. Financial System



Bob Litterman – Founding Partner, Kepos Capital


Bob is Chairman of the Risk Committee and a founding partner of Kepos Capital, a New York City-based investment management fund.

Prior to joining Kepos Capital in 2010, Bob enjoyed a 23-year career at Goldman Sachs, where he held roles in research, risk management, investment and thought leadership. In 1994, Bob was named a partner and became head of the firm-wide risk function.

During his tenure at Goldman, Bob researched and published a number of groundbreaking papers in asset allocation and risk management. He is the co-developer of the Black-Litterman Global Asset Allocation Model, a key tool in investment management, and has co-authored a number of influential books on risk management and modern investment management.

In addition to his work at Kepos Capital, Bob serves on a number of boards, including the World Wildlife Fund, and as the chair of the Climate-Related Market Risk Subcommittee for the Commodity Futures Trading Commission.

Through the course of Bob’s illustrious career, he has earned numerous accolades including entrance into Risk Magazine’s Risk Management Hall of Fame and being named as GARP’s Risk Manager of the Year in 2013.

Where next?

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