Climate change: what are the threats and opportunities for Belgian banks?

Details

Supervisors

Olieslagers, Ruben

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

Climate change threatens the stability of financial institutions through physical and transitional risks. These will impact the whole risk taxonomy of banks. Indeed, the dramatic consequences of climate change will translate mainly into credit risk, operational risk, liquidity risk, market risk, and reputational risk. Banks will have to adapt quickly and be foreseeable to ensure an effective ecological transition. However, some elements are holding back this transition. A lack of sustainable data creates reporting challenges and hinders investors’ investment choices due to unreliable information. It will be essential to correct these shortcomings in the future because the ecological transition will require massive investments in SRI. In Belgium, the large banks seem to be on the right track to ensure an optimal ecological transition. On the contrary, as has been pointed out in this work, smaller banks are lagging behind. To not be left behind, they must quickly integrate economic factors into their activities.