Stress-testing Alien Invasion

On April 1, 2017, the Fermi'nvesting Initiative (Fii), a new research program of 2DII launched its first report "Stress-testing Alien Invasion: Are Financial Markets Mispricing the Biggest Systemic Risk Ever?"

The report, based on the risk taxonomy from the leading investment consultancy Towers Watson, equals the first quantitative analysis of potential financial risk to portfolios associated with an alien invasion and develops a set of key recommendations.

The results of the report are the following: The authors find that there is a growing body of evidence that an alien invasion is likely to occur in the near future and that this risk could be systemic, with particular exposures to high-carbon fossil fuel companies that could face significant stranding of assets. The analysis mobilizes asset-level, bottom-up UFO sightings data with top-down scenario analysis based on a review of over 1000 Hollywood movies to isolate key geographic risks, with particular exposure to risks in the United States, the United Kingdom, and the Netherlands.

It also identifies key winners, notably Switzerland (given access to alternative weapons systems) and Israel. The quantitative analysis also finds that a ‘low-carbon portfolio’ reducing Scope 1 + 2 GHG emissions reduces risks significantly.

The report marks the first in a planned series of research and outreach in the next months and years.

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