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The risks and costs of climate change for banks

May 19, 2021

RESEARCH REPORT

In brief

Quantifying the risk

95%

Almost all electricity would need to be low-carbon.

70%

Currently only 1% of cars are electric. This would have to shift to 70%.

80%

Industrial CO2 emissions would need to drop by 80%.

Rethinking the risk lexicon

Regulators expect action

Facing the climate challenge

Adjust risk appetite

Climate risks should be incorporated into the existing risk taxonomy, rather than a new, separate climate risk category.

Create a climate risk register

A point-in-time view of a bank’s climate risk exposure serves as a basis for an ongoing review to find risks that need active monitoring.

Conduct framework gap analysis

Based on the relevant climate risk register, banks should assess the maturity of their climate risk management.

Quantify and measure climate risks

Banks can build tools to support active risk management and scenario analysis.

Peter Beardshaw

Managing Director – Global Financial Services Sustainability Lead

Peter is focused on helping organizations embed sustainability and ESG into their value chain.


KUANGYI WEI

Director – Strategy & Consulting

Based in London, Kuangyi is focused on aligning the regulatory agenda with financial institutions’ strategic objectives.


Miroslav Petkov

DIRECTOR – STRATEGY & CONSULTING

Based in London, Miroslav helps global financial institutions integrate climate change within their risk management and investment capabilities.


Alex Frankl

MANAGING DIRECTOR – STRATEGY & CONSULTING

Alex leads enterprise risk management services for Banking UK. He is skilled in risk & capital management, IFRS9 and credit decisioning.


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