Modelling Economic Complexity: Insights for Risk Professionals
Release Date: 12/19/2024
Beyond Climate: A Risk Professionals’ Guide to the Biodiversity COPs
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Hear from Eva Zabey, CEO of Business for Nature, as we dive into the complex landscape of environmental diplomacy, and the role of business in halting and reversing biodiversity loss. We know that our economies depend on nature. But with biodiversity loss and climate change both putting pressure on ecosystems, businesses and financial institutions are facing increasing risks. In recognition of this, there is action on the policy front, and with global biodiversity agreements taking shape, the question isn’t whether firms should act – but how they can do so effectively. That’s why in...
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The CSRD Effect: How Regulation is Elevating Nature Risk
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What We Learned About Climate and Nature Risk in 2024
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Hear from Jo Paisley and Maxine Nelson of the GARP Risk Institute as they look back on key learnings from the latest season of the Climate Risk Podcast. As we head into 2025, the GARP Climate Risk Podcast kicks off the new year with a retrospective on the past 12 months, reviewing the key themes and insights that emerged during 2024. From soil scientists to policymakers, financial experts to climate modelers, we’ve welcomed a diverse range of guests to share their expertise. This episode revisits some of the key learnings from these conversations and highlights the invaluable advice...
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Modelling Economic Complexity: Insights for Risk Professionals
Climate Risk Podcast
Hear from Prof. J. Doyne Farmer, Professor of Complex Systems Science at the University of Oxford, as we explore new modelling approaches designed to better capture the complex and chaotic nature of our climate and economy. We spend a lot of time on this podcast covering the transition to a low carbon economy, which will be driven largely by policies and technological innovation. These policies tend to be based on insights from economics. And our view on the pace of innovation is often informed by expert judgement. But traditional economic models often oversimplify the world, leading to poor...
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Predicting Our Climate Future: What We Do, Don’t and Can’t Know
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Hear from Prof. David Stainforth of LSE’s Grantham Research Institute, as we explore the limitations of climate modelling and the implications for risk management. There are some things in life that we can be virtually certain about: if one throws a ball into the air, it will fall back down. Similarly, scientists have evidence beyond reasonable doubt that atmospheric concentrations of carbon dioxide have increased a lot in the recent past. But there are quite a lot of things that we don’t know with any confidence, giving rise to significant uncertainty when we try to forecast those...
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How to Fix Climate Change & Biodiversity Loss at the Same Time
Climate Risk Podcast
Hear from Prof. Pete Smith of the University of Aberdeen, as we explore the overlap in the challenges from, and solutions to, climate change and biodiversity loss. Climate change and biodiversity loss are often treated separately – in science, policy, and even risk management. But as the connections between these global crises come into sharper focus, it’s clear that understanding them together is essential for real progress. In this episode, we break down those silos of climate and nature, exploring an integrated approach and how it might help us address these challenges...
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Carbon Pricing: Harnessing the Power of Markets to Drive Climate Action
Climate Risk Podcast
Hear from Gordon Bennett, Managing Director at ICE, as we dive into theory and practice of carbon pricing and its important role in driving the transition to net zero. Carbon pricing is the poster child of market-based solutions to climate change. The principle is simple: by assigning a cost to greenhouse gas emissions, we incentivize polluters to emit less, and to do so in the most cost-effective way. But there’s a significant gap between the theory and practice. Currently, only 24% of global emissions – about 12.8 gigatonnes – are covered by pricing mechanisms such as carbon taxes...
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Rethinking Natural Catastrophe Modeling: New Approaches for a Changing Climate
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Hear from three leading experts in natural catastrophe modeling, as we explore how climate change is causing the insurance industry to rethink their approach to modeling extreme weather. In the previous episode, we discussed the challenges facing the insurance industry from climate change – so in this episode, we’re going to dive into some of the solutions. Since natural catastrophe (Nat Cat) modeling was established in the late 1980s, the predictive power of their models has come from the statistical analysis of historical data. But as climate change continues to push the frequency and...
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Uninsurable: The Future of Insurance in a Changing Climate
Climate Risk Podcast
Hear from two leading experts, as we explore how insurance is adapting to climate change and the role of the industry beyond underwriting. Insurance plays a critical role in protecting households and businesses from the impacts of climate change, and with physical risks on the rise, it will become ever more important. However, insurers have also been significantly impacted by these risks, with annual losses from natural catastrophes exceeding 100 billion dollars for four consecutive years. The primary concern is that these physical risks eventually become uninsurable, as we are already...
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Urban Resilience: How Our Cities Must Adapt to Climate Change
Climate Risk Podcast
Hear from Emma Howard Boyd CBE, Chair of the London Climate Resilience Review, as we dive into the challenges of climate adaptation and what it means for our cities. 2023 was not only the warmest year on record, it also marked the warmest 10-year period on record. As we witness first-hand the impacts of a warming climate, including heatwaves, more intense precipitation and increased flooding, the case for building resilience against these risks becomes ever more important. This is particularly so in our cities, where the concentration of populations and economic activity make adaptation...
info_outlineHear from Prof. J. Doyne Farmer, Professor of Complex Systems Science at the University of Oxford, as we explore new modelling approaches designed to better capture the complex and chaotic nature of our climate and economy.
We spend a lot of time on this podcast covering the transition to a low carbon economy, which will be driven largely by policies and technological innovation. These policies tend to be based on insights from economics. And our view on the pace of innovation is often informed by expert judgement. But traditional economic models often oversimplify the world, leading to poor policy design. And we tend to underestimate the exponential rate of technological change, making us unduly pessimistic about the transition.
Today’s guest has thought a great deal about both these issues. That’s why in today’s episode we’ll be diving into the world of complexity economics and agent-based modelling, which can help us better navigate the risks and opportunities associated with the transition. We’ll discuss:
- How agent-based models are very well suited to modelling complex, non-linear systems, such as the economy;
- How past innovation cycles can provide invaluable insights on what we might expect to see in the transition; and
- What the models tell us about the appropriate speed of the transition to a net zero world.
To find out more about the Sustainability and Climate Risk (SCR®) Certificate, follow this link: https://www.garp.org/scr
For more information on climate risk, visit GARP’s Global Sustainability and Climate Risk Resource Center: https://www.garp.org/sustainability-climate
If you have any questions, thoughts, or feedback regarding this podcast series, we would love to hear from you at: [email protected]
Links from today’s discussion:
- Making Sense of Chaos: A Better Economics for a Better World: https://www.penguin.co.uk/books/284357/making-sense-of-chaos-by-farmer-j-doyne/9780241201978
- Santa Fe Institute’s Office of Applied Complexity: https://www.santafe.edu/applied-complexity/office
- GARP Climate Risk Podcast with Simon Sharpe: https://www.garp.org/podcast/five-times-faster-cr-240321
- GARP Climate Risk Podcast with David Stainforth: https://www.garp.org/podcast/predicting-climate-future-cr-241128
Speaker’s Bio(s)
Prof. J. Doyne Farmer, Professor of Complex Systems Science, University of Oxford
J. Doyne Farmer is Baillie Gifford Professor of Complex Systems Science at the Smith School of Enterprise and the Environment and Director of the Complexity Economics programme at the Institute for New Economic Thinking University of Oxford. He is also External Professor at the Santa Fe Institute and Chief Scientist at Macrocosm.
His current research is in economics, including agent-based modelling, financial instability and technological progress. He was a founder of Prediction Company, a quantitative automated trading firm that was sold to UBS in 2006. His past research includes complex systems, dynamical systems theory, time series analysis and theoretical biology. His book, Making Sense of Chaos: A Better Economics for a Better World, was published in 2024.
During the 1980s he was an Oppenheimer Fellow and the founder of the Complex Systems Group at Los Alamos National Laboratory. While a graduate student in the 1970s he built the first wearable digital computer, which was successfully used to predict the game of roulette.