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Incorporating Climate Risk into Financial Strategies: Sustainable Solutions for Resilient Banking Systems
Subject area: Science,Engineering and Technology · Area of research: Financial Strategies
Abstract
Incorporating climate risk into financial strategies is essential for building resilient banking systems capable of withstanding the multifaceted impacts of climate change. This paper explores the significant risks posed by both physical and transition climate-related events, which can undermine asset values, elevate credit risk, and destabilize financial markets. It emphasizes the need for financial institutions to adopt robust risk management frameworks that integrate climate risk assessments, develop climate stress testing, and incorporate scenario analysis. Additionally, the paper highlights the importance of Environmental, Social, and Governance (ESG) factors in investment decisions to align financial activities with sustainability goals. Key strategies for enhancing resilience include the adoption of green finance and sustainable lending practices, innovation in financial products such as green bonds and climate risk insurance, and fostering collaborations and partnerships for climate resilience. The paper concludes with recommendations for policymakers, financial institutions, and stakeholders to ensure a comprehensive approach to managing climate risk and promoting global sustainability.
Keywords
Climate risk, Resilient banking systems, Green finance, ESG factors, Climate stress testing
How to cite this paper
@article{1705157,
author = {Chikezie Paul-Mikki Ewim, Chima Azubuike, Olajumoke Bolatito Ajani, Lawrence Damilare Oyeniyi, Titilope Tosin Adewale},
title = {Incorporating Climate Risk into Financial Strategies: Sustainable Solutions for Resilient Banking Systems},
journal = {Iconic Research And Engineering Journals},
year = {2023},
volume = {7},
number = {4},
pages = {579-586},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1705157.pdf},
abstract = {Incorporating climate risk into financial strategies is essential for building resilient banking systems capable of withstanding the multifaceted impacts of climate change. This paper explores the significant risks posed by both physical and transition climate-related events, which can undermine asset values, elevate credit risk, and destabilize financial markets. It emphasizes the need for financial institutions to adopt robust risk management frameworks that integrate climate risk assessments, develop climate stress testing, and incorporate scenario analysis. Additionally, the paper highlights the importance of Environmental, Social, and Governance (ESG) factors in investment decisions to align financial activities with sustainability goals. Key strategies for enhancing resilience include the adoption of green finance and sustainable lending practices, innovation in financial products such as green bonds and climate risk insurance, and fostering collaborations and partnerships for climate resilience. The paper concludes with recommendations for policymakers, financial institutions, and stakeholders to ensure a comprehensive approach to managing climate risk and promoting global sustainability.},
keywords = {Climate risk, Resilient banking systems, Green finance, ESG factors, Climate stress testing},
month = {October},
}