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• Date : 2026-05-18

In response to the growing impact of climate change on global financial markets, Tunghai University invited Robert F. Engle III—recipient of the 2003 Nobel Prize in Economic Sciences and Professor Emeritus at New York University’s Stern School of Business—to deliver a distinguished lecture on campus. Drawing on econometric insights, Professor Engle examined how climate risk is reshaping the global financial system and introduced the innovative concept of “termination risk,” offering valuable guidance for both governments and businesses navigating the path toward net-zero transition.

Tunghai University invited Nobel laureate Robert F. Engle III, Professor Emeritus at NYU Stern School of Business, to deliver a keynote lecture on climate risk and financial systems.

The Tunghai Nobel Laureate Lecture was held on the 2nd at the Maobang Hall of the Humanities Building. The event was attended by President Kuo-En Chang, Board Chairman Ching-Mai Wu and his wife Chao-Chen Lai, Vice President Cheng Liu, Dean of the College of Management Chun-Yao Tseng, and other senior administrators. The session was hosted by International Affairs Dean Min-Hsun Liao. Professor Engle delivered a keynote speech titled “A Financial Approach to Climate Risk,” emphasizing that climate change is not merely a scientific issue, but a financial risk that must be priced and actively managed. He was joined in a panel discussion by Professor Yi-Tung Kuo of Tunghai University and Professor Ying-Fen Kao of National Central University, one of Engle’s former students.

Professor Engle’s lecture, “A Financial Approach to Climate Risk,” emphasized that climate change must be understood and managed as a financial risk.

Professor Engle categorized climate risk into two major types. The first is physical risk, arising from extreme weather events such as hurricanes and floods, often with strong geographic specificity. The second is transition risk, driven by policy changes, regulatory shifts, and technological advancements that disrupt markets. To address these risks, Engle proposed the use of hedge portfolios as a quantitative strategy. He also introduced the CRISK (Climate Risk Index) from NYU’s V-Lab platform, which helps investors estimate potential capital shortfalls of financial institutions under climate stress scenarios. He further presented the latest data trends across the United States, China, Taiwan, and global markets as of January 2026.

In discussion with finance scholars, Engle highlighted renewable energy as a key strategy for Taiwan to reduce reliance on imported fossil fuels and manage energy price risks.

Dean Tseng highlighted another key theme of the lecture: the concept of termination risk. Using the example of a luxury beachfront hotel threatened by rising sea levels, Engle illustrated how firms adjust their strategies when anticipating an inevitable endpoint—reducing maintenance, scaling back investment, and returning capital to shareholders through dividends or stock buybacks. He noted that similar patterns are already emerging in traditional fossil fuel industries, where capital returns and mergers are replacing expansion strategies. Even amid political efforts to revive coal and fossil energy, market forces, he argued, will ultimately drive structural transition.

Vice President Liu added that despite political uncertainties, Professor Engle remains optimistic about the future. He pointed out that the rapid advancement of AI will significantly increase electricity demand, positioning renewable energy sources such as solar and wind—known for their cost efficiency and scalability—as key suppliers. Engle also cautioned that countries rolling back climate regulations risk becoming “free riders,” and emphasized that only through collaboration among multinational corporations, academia, and governments can a positive global impact be achieved. He believes that economic incentives and growing public awareness of climate disasters will ultimately steer the world back toward effective climate mitigation.

President Kuo-En Chang presented Professor Engle with an honorary professorship certificate and commemorative gift, underscoring the university’s role in bridging academia and real-world challenges.

During the discussion session, Professor Kuo asked how small and medium-sized enterprises (SMEs) in Taiwan should respond to long-term climate risks. Engle responded that as renewable energy costs continue to decline, adopting green energy is not only a matter of compliance but also a strategic way to reduce costs and risks. He emphasized that market mechanisms will naturally drive firms toward more cost-effective energy solutions, without relying solely on government subsidies. Regarding Taiwan’s upcoming carbon fee policy, set to take effect in May, Engle noted that although the fee level is lower than that of the European Union, developing renewable energy remains a critical strategy. For a resource-scarce economy like Taiwan, it not only supports carbon reduction but also reduces dependence on imported fossil fuels and mitigates exposure to global energy price volatility.

At the conclusion of the lecture, President Chang personally presented Professor Engle with an honorary professorship certificate and a glass replica of Tunghai’s iconic chapel as a commemorative gift. He remarked that the Nobel Laureate Lecture was not only a significant academic event, but also a reflection of the university’s role in a rapidly changing world—not merely as a transmitter of knowledge, but as a vital platform connecting academia and practice, and fostering rational, forward-looking dialogue.

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