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Evaluating sustainability actions under uncertainty: the role of improbable extreme scenarios.
- Source :
- Geneva Risk & Insurance Review; Mar2024, Vol. 49 Issue 1, p59-74, 16p
- Publication Year :
- 2024
-
Abstract
- An optimality condition for sustainability actions under discounted expected utility is that, ex post, we should almost surely regret having adjusted them too much for risk. In other words, ex post, one would almost surely feel regret for "excess" precautionary saving, excess insurance and hedging coverage, or for excess risk-bearing. Moreover, for marginal investments whose impacts materialize in t years, t tending to infinity, their state-contingent present value tends to zero almost surely, in spite of the fact that their expected value is one. The value of sustainable actions is thus mostly derived from very improbable extreme scenarios. [ABSTRACT FROM AUTHOR]
- Subjects :
- SUSTAINABILITY
EXPECTED utility
INSURANCE
PRECAUTIONARY principle
REGRET
Subjects
Details
- Language :
- English
- ISSN :
- 1554964X
- Volume :
- 49
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Geneva Risk & Insurance Review
- Publication Type :
- Academic Journal
- Accession number :
- 178130410
- Full Text :
- https://doi.org/10.1057/s10713-023-00095-0