Title: Managing Environmental Financial Risks though Modeling of Coupled Natural Human Systems
Variable environmental systems, particularly those related to hydrology, often give rise to extreme events (e.g., droughts, floods) that impact the costs and revenues of organizations in both the public and private sectors. The financial instability that results can be very disruptive and therefore influence decisionmaking in a number of ways that can be both expensive and environmentally burdensome. Understanding the nature of the financial risks posed in terms of both their frequency and severity requires integrated modeling of the hydrologic and economic/financial systems involved. Once these risks have been quantified, financial strategies for managing risk can be developed, with these strategies often enhanced through the development of novel financial instruments (e.g, index insurance). A general approach to characterizing coupled natural-human systems will be discussed, followed by a description of several ongoing studies funded via NSF’s Water Sustainability and Climate (WSC) and Innovations at the Nexus of Food, Energy, Water Systems (INFEWS) programs, among others. Examples will include evaluating strategies for managing the financial risk of drought for urban water utilities, electricity generators, agricultural producers and inland navigation (e.g., Mississippi River). Results suggest that environmental financial risk can often be substantially reduced through the use of innovative financial instruments, and that this risk reduction has the potential to lead to lower environmental impact.
About the speaker
Dr. Characklis began his career at the University of North Carolina at Chapel Hill in 2001 and currently serves as the Philip C. Singer Distinguished Professor in the Department of Environmental Sciences and Engineering, where he is also the founding Director of the Center on Financial Risk in Environmental Systems. In addition to his academic appointments, Dr. Characklis also serves as an Editor for Hydrology and Earth Systems Sciences and on the Editorial Board of Water Security, and is a former Associate Editor of Water Resources Research. Prior to joining UNC, Dr. Characklis spent two years as Director of Resource Development and Management at Azurix Corp. (a division of Enron Corp.) in Houston, Texas. Before that he served two years as a Fellow with the National Academy of Engineering in Washington, D.C. In 2011, he was named a Leopold Environmental Leadership Fellow by the Woods Institute at Stanford University. In 2012, he was elected to the Board of the Association of Environmental Engineering and Science Professors, later serving as President (2015-16), and in 2014 he was named a Fellow to the National Academy of Sciences’ Kavli Frontiers of Science initiative. Dr. Characklis holds a Ph.D. and M.S. from Rice University and a B.S. from Johns Hopkins University. He and his wife Raquel reside in Chapel Hill with their three children, Katie (19), Kayla (16) and Will (9).