The sustainable finance market is expected to require up to $6 trillion of capital in the nearest future
The report called “Climate Change: Three Imperatives For Financial Services” revealed that the financial industry could lose nearly up to $1 trillion due to climate change. Although, financial institutions still have the opportunity to lower the risks and raise revenues by shifting capital to more sustainable companies.
According to the study, there is a number of new companies offering a wide range of services aimed to help the market’s development. For instance, some of them offer AI-driven geospatial mapping databases to human-driven subjective research ratings. In addition to that, the major data and index providers along with exchanges have been developing their own offerings.
Besides, Grantham Research Institute on Climate Change estimated more than $2.5 trillion of the world’s financial assets could be affected. What is more, some of the largest impacts on financial institutions will play out over a 30- to the 50-year period, well beyond the decision-making timeframe of most institutions.
As to climate risk management frameworks, many banks across Asia expressed their intentions to look at climate risk in their jurisdictions. For example, the People’s Bank of China, the Bank of Japan, the Reserve Bank of India and the Monetary Authority of Singapore are keen to manage climate risks.
In Europe, France’s ACPR, the Bank of England and the Dutch National Bank have already started to conduct climate risk stress tests for their domestic institutions.