Climate change and financial management

30 MAY,2021 | MEDC


 

It is likely that banks worldwide will face new capital requirements that reflect how exposed their balance sheets are to global warming and climate change considerations. Regulators couldsoon adopt this approach to force banks to channelize resources away from those corners of the economy that pollute, and towards businesses that commit to lower carbon emissions. Since the Paris Climate Agreement was signed in 2015, lenders globally have poured over $3.6 trillion into fossil fuel financing. Only this year has green bond and loan financing surged ahead. The challenge now is probably to ensure that banks get the (timely and reliable) data they need from companies to enable them to assess their climate risks and take educated guesses on formulating their lending strategies. Climate change is now impacting every aspect of our daily lives, and so it is only a matter of time before the risk-management divisions of the banking and financial sector also factor it into their calculations. 

*Photo Credit: Google

 

 

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