Climate Change Is Becoming a Financial Variable, Not Just an Environmental One

The recent climate-finance paper from EDHEC Climate Institute by Lionel Melin and Fangyuan Zhang represents an ambitious attempt to bridge climate science, macroeconomics, and asset pricing into a unified framework.

The article’s core thesis is provocative but increasingly difficult for markets to ignore:

Climate change may permanently alter discount rates, equity valuations, and long-term expected returns across global financial markets.

That is no small claim.

For decades, many institutional investors treated climate risk as primarily:

• ESG branding
• reputational management
• regulatory compliance
• sector-level risk

This paper argues climate change instead belongs at the center of macro-financial modeling itself.