Climate Risk Management in Financial Institutions: Pathway to a Sustainable Future

Authors: Zeeshan Rashid, Navin Rauniar, Piyush Srivastava



At NFI, our mission is to bring the nordics together to boost global sustainable innovation. We work with our members, network and partners to create a better future. Sustainability is a priority for us these years and We are happy to share what our members are working with. In this post we show TCS perspective on climate risk management in financial services industry, specially relevant for our members in fintech. Enjoy!


Abstract



The ongoing pandemic has delivered a massive shock to the interconnected global economy resulting in unprecedented consequences. The pandemic is not a black swan event - epidemiologist, academics, and the World Health Organization (WHO) routinely issued warnings that were ignored. But the crisis has highlighted no only the ability of one-off events to trigger a global economy downturn but also their potential to recur, albeit slowly and painfully. Climate change with its capacity for large-scale impact to the environment, businesses, and life as we know it, is one such event. The need for governments and businesses to manage climate risks has this emerged as an imperative that can no longer be brushed aside.


The impact of climate risk on the banking and financial services industry will be sizeable; in fact, climate risks can threaten the stability of the financial system. Global financial institutions already experiencing uncertainty in their loan portfolios given high exposure to stress sectors such agriculture and real estate that are witnessing the negative impacts of global warming. In addition, exposure to the energy sector contributes significantly to greenhouse gases, will eventually increase compliance as well as transition costs, worsening systemic vulnerabilities.


This white paper discusses the impact of climate change on the financial services industry and presents a strategy that financial institutions can adopt to manage climate change risks.


Download here the complete document:

Pathway to a Sustainable Future V1.0
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About the Authors