Climate Risk: Its Implications for Financial Institutions
By John Thackeray
A featured article of our April 2020 edition of PRMIA's Intelligent Risk quarterly newsletter
The defining issue and top global emerging risk of 2020 is climate risk, which has been gaining a sense of urgency with major implications for financial institutions. Climate change can no longer be viewed in isolation as a reputational risk but must be seen and addressed as a financial risk that needs to be integrated into existing risk management frameworks. Climate risk is a “transverse” risk that can extend its reach into existing risk stripes. As climate risk manifests itself through existing risk stripes, climate change can also heighten credit risks for banks, as demonstrated by the recent PG&E bankruptcy. Banks need to consider how climate-driven financial risks can be embedded into current financial risk management frameworks.
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