Bezpieczny Bank nr 4 (77) 2019, s. 63-80
https://doi.org/DOI: 10.26354/bb.4.4.77.2019

Ludwik Kotecki
Ludwik Kotecki – Instytut Odpowiedzialnych Finansów (Responsible Finance Institute)
ORCID: 0000-0001-8791-1218
lkotecki@protonmail.com

JEL codes:F64, G18, G28, G32, Q54

Climate change as a source of risk in the financial sector

Abstract:
The article addresses new risks in the financial sector connected with climate change. With greenhouse gas emissions, temperatures will continue to rise and thus increase the financial risk arising from the physical consequences of climate change. The prevention of such consequences will increase the financial risk of the transition to a low-carbon economy, and will lead to changes in business models, to the phenomenon of stranded assets, etc. At the same time, the growing awareness of the need to prevent further climate change and to adapt to the changes already happening intensifies the pressure of various entities and environments on the financial sector to become involved in such activities, and to run its business responsibly and in accordance with the sustainable development concept. All this opens the financial sector to new risks (in addition to the physical risk and the transition risk), in the management of which it has no experience. Both the hedging and especially the materialisation of such risks will affect the stability of the financial sector. Moreover, such new conditions in the functioning of the financial sector, caused by climate change, generate new obligations and challenges for regulators and financial supervisors.

Key words:
financial sector, climate risks, physical risk, transition risk, ESG, climate initiatives in the financial sector

Bibliography:

  1. Aglietta, Michel, Espagne Etienne. (2016). “Climate and Finance Systemic Risks: more than an analogy? The climate fragility hypothesis” CEPII Working Paper No 2016-10
  2. Bank of England, Prudential Regulation Authority, (2018): “Transition in thinking: The impact of climate change on the UK banking sector”, September
  3. Bank of England, Prudential Regulation Authority, (2018): “Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change”, Consultation Paper 23/18, October
  4. Bukowski Maciej, Aleksander Śniegocki, Zofia Wetmańska, Joanna Wis-Bielewicz, (2018): „The climate finance domino. Transition risks for the Polish financial sector”, WiseEuropa
  5. Burke, Marshall & Hsiang, Solomon. (2015). “Global non-linear effect of temperature on economic production”, Nature 527(7577)
  6. Campiglio, Emanuele, Dafermos Yannis, Monnin Paul., Ryan-Collins Josh., Schotten Guido, Tanaka Misa (2018): “Climate change challenges for central banks and financial regulators”, Nature Climate Change, vol. 8 (6), June,
  7. Carney, Mark (2015): “Breaking the tragedy of the horizon – climate change and financial stability”, Speech at Lloyd’s of London, London, 29 September,
  8. Carney, Mark (2018): “A Transition in Thinking and Action”, Speech at International Climate Risk Conference for Supervisors, De Nederlandsche Bank, Amsterdam, 6 April,
  9. Coalition of Finance Ministers for Climate Action (2019): “Helsinki Principles”
  10. Coalition of Finance Ministers for Climate Action (2019): “Explanatory Note to the Coalition Principles”
  11. Dafermos, Yannis, Maria Nikolaidi, Giorgos Galanis, (2018):”Climate Change, Financial Stability and Monetary Policy”, Ecological Economics 152, 219-234
  12. EU High-Level Expert Group on Sustainable Finance, (2018): “Financing a Sustainable European Economy”, Final report 2018 of the High-Level Expert Group on Sustainable Finance, January
  13. European Commission, (2018): “Action Plan: Financing Sustainable Growth”, Communication from the Commission to the European Parliament, the European Council, The Council, The European Central Bank, The European Economic and Social Committee and The Committee of the Regions,
  14. European Investment Bank, (2016): “Restoring EU competitiveness”, January
  15. European Systemic Risk Board, (2016): “Too late, too sudden: Transition to a low-carbon economy and systemic risk”, Reports of the Advisory Scientific Committee, No 6 / February 2016, Frankfurt, Germany
  16. Fundacja Standardów Raportowania, Stowarzyszenie Emitentów Giełdowych, Bureau Verita, (2019): “Badanie Świadomości Klimatycznej Spółek (Climate Crisis Awareness Study)”
  17. Global Sustainable Investment Alliance, (2018): “Global Sustainable Investment Review 2018”
  18. Hourcade, Jean-Charles, (2015): “Harnessing the animal spirits of finance for a low-carbon transition”, Towards a Workable and Effective Climate Regime, Edited by Scott Barrett, Carlo Carraro and Jaime de Melo, A VoxEU.org eBook, CEPR Press and Ferdi,
  19. International Finance Corporation, (2010): “Climate Risk and Financial Institutions. Challenges and Opportunities”, World Bank Group
  20. International Monetary Fund, (2019): “Global Financial Stability Report”, October
  21. IPCC, (2018): Summary for Policymakers. In: Global warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty [V. Masson-Delmotte, P. Zhai, H. O. Pörtner, D. Roberts, J. Skea, P. R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R. Pidcock, S. Connors, J. B. R. Matthews, Y. Chen, X. Zhou, M. I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, T. Waterfield (eds.)]. World Meteorological Organization, Geneva, Switzerland, 32 pp
  22. Kulińska-Sadłocha E. (2009): „Banki a zmiany klimatyczne”, w: Finanse 2009 – Teoria i praktyka, Bankowość, red. nauk. K. Brzozowska, S. Flejterski, Zeszyty Naukowe nr 548, Wydawnictwo Uniwersytetu Szczecińskiego, Szczecin 2009, s. 175-182”.
  23. Monnin, Pierre, (2018): “Integrating Climate Risks into Credit Risk Assessment. Current Methodologies and the Case of Central Banks Corporate Bond Purchases”, Discussion Note 2018/4, Council on Economic Policies (CEP), December,
  24. Munich Reinsurance Company, (2019): “Natural Catastrophe Review 2018” Geo Risks Research, NatCatSERVICE
  25. Porter, Michael E. and Claas van der Linde, (1995): “Toward a New Conception of the Environment-Competitiveness Relationship,” Journal of Economic Perspectives, Vol. 9, No. 4 (Autumn, 1995), pp. 97–118
  26. The Network for Greening the Financial System, (2018): “NGFS First Progress Report”, October
  27. The Network for Greening the Financial System, (2019): “First comprehensive report. A call for action: Climate change as a source of financial risk”, April
  28. The Network for Greening the Financial System, (2019): “Macroeconomic and financial stability. Implications of climate change”, Technical supplement to the First comprehensive report, July
  29. Task Force on Climate-Related Financial Disclosures (TCFD), (2017): “Recommendations of the Task Force on Climate-Related Financial Disclosures. Final Report”, June
  30. Task Force on Climate-Related Financial Disclosures (TCFD), (2019): “Task Force on Climate-Related Financial Disclosures: 2019 Status Report”, June
  31. UNEP Finance Initiative, (2019): “Principles for Responsible Banking”
  32. World Meteorological Organization, (2019): “United In Science. High-level synthesis report of latest climate science information convened by the Science Advisory Group of the UN Climate Action Summit 2019”

Pełny tekst artykułu w pdf: