Dear John,
The U.S. banking sector is far more exposed to the systemic and financial risks of the climate crisis than previously understood. That’s the resounding message from a new Ceres Accelerator report, Financing a Net-Zero Economy: Measuring and Addressing Climate Risk for Banks. |
This new report assesses climate risk through the lens not only of banks’ lending to the fossil fuel sector, but also to industries that rely heavily on fossil fuels, including agriculture, manufacturing, construction, transportation and the financial sector itself. This more complete climate risk assessment finds that
more than half of U.S. bank lending analyzed is vulnerable to the risks posed by the climate crisis.
As Dan Saccardi, senior director of the Ceres Company Network and lead author of the report said, “It’s not just about lending to one company or one sector. It’s about the way climate impacts the entire system, and therefore, the entire portfolio.”
The report warns that if banks fail to disclose and manage these risks across sectors and asset classes, they could be subject to major losses in the event of a sudden and dramatic change in public, regulatory, or investor sentiment. These losses could send destabilizing waves across the economy.
To address this, the report Financing a Net-Zero Economy: Measuring and Addressing Climate Risk for Banks makes 13 recommendations that banks can act on right now to assess and mitigate their exposure to climate risks, including:
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Improve their existing climate risk analysis tools and methods
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Require bank clients to provide more data in key climate-related areas
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Develop risk management techniques like stress testing and scenario analysis
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Build climate risk into day-to-day decision-making tools such as client earnings models
Finally, the report recommends that banks act to mitigate their exposure to climate risk by setting and disclosing financing portfolio targets that are aligned with the most ambitious goals of the Paris Climate Agreement, including detailed interim targets and specific timelines for sectoral portfolios to reach net-zero emissions. |
| After you’ve downloaded the report, be sure to
join us tomorrow to discuss its findings and recommendations in a free webinar. |
Sincerely,
 |
|
 Steven M. Rothstein
Managing Director,
Ceres Accelerator for Sustainable Capital Markets
@stevenrothstein | |
