Etzion, Dror and Kypraios, Emmanuel and Forgues, Bernard (2019) Employing Finance in Pursuit of the Sustainable Development Goals: The Promise and Perils of Catastrophe Bonds. Academy of Management Discoveries, 5 (4). pp. 530-554.

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Abstract

The UN sustainable development goals (SDGs) present a formidable funding challenge. Financial innovation is one way through which resources can be secured, while also providing business opportunities for market actors. The insurance sector, in particular, has been at the forefront of such innovation, developing financial instruments to manage the flooding, fire, and storm risks that characterize an increasingly unstable world. We examine one such financial instrument—the catastrophe bond—which transfers extreme risk from insurers and reinsurers to capital markets. Using a comprehensive database of all catastrophe bonds issued through March 2016, we find that the modeling which underlies catastrophe bonds is not demonstrably better than guesswork at predicting the financial consequences of extreme events. Moreover, secondary data reveal that market actors are under no illusions about the level of precision and accuracy provided by the models. Our analysis suggests that catastrophe bonds do not lend themselves to analysis through conventional sociological theories of financial markets. Drawing on theories of ignorance, we reflect on the social arrangements that sustain financial markets in contexts of extreme uncertainty. We conclude with some cautionary notes for harnessing financial tools in support of the SDGs.

Item Type:	Article
Additional Information:	Cite as: Dror Etzion, Emmanuel Kypraios, and Bernard Forgues, 2019: Employing Finance in Pursuit of the Sustainable Development Goals: The Promise and Perils of Catastrophe Bonds. AMD, 5, 530–554, https://doi.org/10.5465/amd.2018.0137
Keywords:	Sustainable Development Goals; Catastrophe Bonds; Financial innovation;
Academic Unit:	Faculty of Social Sciences > School of Business
Item ID:	14965
Identification Number:	https://doi.org/10.5465/amd.2018.0137
Depositing User:	Emmanuel Kypraios
Date Deposited:	27 Oct 2021 15:43
Journal or Publication Title:	Academy of Management Discoveries
Publisher:	Academy of Management
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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