Managing the risk of climate change within banks may rest on interpreting carbon intensity correctly
Carbon intensity is a much-quoted, but deceptively nuanced metric. The banking sector needs to understand it fully for carbon disclosures and risk management. Carbon Intensity is a common metric for comparative carbon auditing… CI, as a metric, represents the amount of carbon emitted per unit of activity. This is typically expressed as ‘KgCO2 per unit’, […]
The emergence of Border Carbon Adjustments must be on banks’ radars
Border Carbon Adjustments (BCAs) alter the impact of carbon pricing on credit risk management. Banks must understand these nuances to properly manage their balance sheet risks. Carbon pricing increases the risk of carbon leakage… The ultimate goals for reducing CO2 and other Greenhouse Gases (GHGs) are agreed upon at a global level, at the Conferences of Parties (COPs). […]
Public private finance schemes and evolving subsidies are directional markers to de-risking green financing
Direct and indirect subsidies into sustainable projects enable banks to recognize the focus and speed of climate change mitigation/adaptation. The gap that exists between the funding requirement of the transition to a greener global economy, and the budgeted plans from world governments, is currently estimated to be in trillions of dollars. Private finance is expected, and needed, to fill this gap, and banks […]
Banks that build carbon pricing into their risk planning will have an advantage as climate finance matures
Carbon pricing schemes are core weapons in the fight against climate change, and their impact will have significant consequences for banks’ balance sheets The year 2021 was officially the 5th warmest year on record and adds to the tally that see the last seven years as the seven warmest since the industrial revolution. 2021’s temperature […]
Consumption rate of the carbon budget will dictate the green transition’s speed and risk
Calibrating climate scenarios will require banks’ risk departments to navigate the vagaries of global carbon budget management. This requires an understanding of what it involves and what it really entails. The carbon budget is a consequence of the 2100 global warming target… In 2015, at the Conference Of Parties (COP) in Paris, the world’s governments […]
Climate-related stranded assets represent significant credit risk to banks
Both transitional and physical climate change will deplete collateral value on the balance sheet. Banks must factor this into credit risk management. In the context of climate change, stranded assets are defined as the ones that will be rendered economically inert, by either environmental changes or policies designed to curtail such changes. A widely used […]
Expectations of climate risk management are growing and banks must create their frameworks now
Governments and regulators are ratcheting up scrutiny and expectations of climate risk. Banks can prepare by looking at early models. Since the Paris COP of 2015, governments around the world have been looking at their economic infrastructure with a view to meeting their pledges and commitments made at that summit. Planning for climate change inevitably […]
Green financing comes in many shades, each carrying differing risk profiles – banks be warned!
Understanding taxonomies, as well as differences between ESG and green bonds, is vital for banks to build sustainable balance sheets. Green funding must meet specific criteria… Along with the rise in awareness about climate change, comes an increasing desire from private finance to fund solutions to the adaptation and mitigation problems. There is no exact […]
Code Red – From the IPCC alert to the COP26 response
Insights on sustainable finance from the UN clarion call through to the world leaders meeting in Glasgow Introduction 2021 has been an important year for climate change awareness. With a COP being held in November, world governments made a series of announcements to demonstrate about their commitment to reach the ambitions set out in the […]
COP26 is in the books and has left strong signals for banks to follow
Amid compromises, disputes, and celebrations, the Glasgow summit has laid down strong markers for the financial industry to utilize, as banks prepare for the climate challenge. COP26 – A Report Card For The Paris Accord Commitments… There was considerable concern when heading into the summit. Climate policies were already implemented, notably across Europe, but many […]
