Insights
System thinking around tipping points is needed for banks’ climate risk strategies
Climate pathways are a mix of adaptation and mitigation. Unexpected physical impacts and positive feedback loops will dictate prioritization of policy rollout. Climate pathways are
Containing climate change requires financing, innovation, adaptation, and mitigation projects
Banks must understand the differences and intersectionalities between these to interpret and use the market signals that determine the credit risk status of sustainability projects.
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
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
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
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
