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  "documentTitle": "Sustainability Risk Under Solvency II",
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  "authorName": "Oliver Wyman",
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      "text": "The essential ingredient of any quantitative approach towards the evaluation of climate-related risks is a forward-looking valuation based on established climate change scenarios.",
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      "text": "COMMONLY CITED CHALLENGES",
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      "text": "Forward-looking nature: Impacts of man-made climate change only visible on recent time scale; Impossible to calibrate model on historical data",
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      "text": "Non-linearity and fat tails: Dominated by inherently non-linear effects; Significant tail events skew possible outcomes materially",
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      "text": "Deep uncertainty: Inherent uncertainty about development and impact; Presence of singular high-impact events, domino effects, tipping points...",
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      "text": "Endogeneity: Future development is largely dependent on political decisions; Possible economic trajectories can differ vastly",
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      "text": "The essential ingredient of any quantitative approach towards the evaluation of climate-related risks is a forward-looking valuation based on established climate change scenarios. Based on these principles, we present a practical approach for ORSA purposes in the following section.",
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      "text": "Note: See e.g. Battiston, Mandel, Monasterolo, CLIMAFIN Handbook: Pricing Forward-Looking Climate Risk under Uncertainty, Working Paper, Climate Finance Alpha (2019)",
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      "kind": "title",
      "text": "THE MODELLING OF CLIMATE-RELATED RISKS POSES SIGNIFICANT CHALLENGES THAT CANNOT BE SOLVED WITHIN TRADITIONAL APPROACHES",
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