Finance : what is the likely impact of climate change on the Banking sector? Will those stress tests on climate rechannel the Investments to a more sustainable future?
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- This thesis aims to bring answer to the following questions: “What is the likely impact of climate change on the Banking sector? Will climate stress tests rechannel the Investments to a more sustainable future?”. It is divided in two sections. The first one is a state-of-the art. It sums up the history regarding human awareness of their impacts on climate, the measures taken by countries and banking sector to be proactive actors in this regard and climate risks consideration (type of risks, defined scenarios, climate impacts, climate risks stress test, metrics). The second part focuses on a more personal analysis of the banking sector capacity to act to rechannelled investments towards greener ones and the needs to have a more sustainable development. The first convincing results about climate-related impacts on financial sector are only popping up. Although results are starting to be disclosed, banks’ statements remain cautious. ECB’s climate stress test conclusions speaking about a learning exercise to assess sector’s preparedness for managing climate risk remain vague. With both these careful approaches and great concerns regarding climate change, banking sector is only at the beginning of its introspection. Currently, is therefore premature, to forge a clear opinion regarding these thesis questions. However, in analysing financial stability, climate-related risk stress test methodologies, policies, etc. to made up my own opinion I would say that I doubt that climate stress tests in the banking sector will rechannel investments towards more sustainability in a near future. Indeed, methodology better definition, standardised approaches, controls have to be put in place by banking supervisory institutions. Also, efforts in the worlds of finance have to be combine with government incentives such as support through fiscal policy. Although the Financial World is slowly moving, the efforts put in place towards a greener future cannot be denied and some bright light can be seen at the horizon.
Citations
Jacquemin, E. (2022). Finance : what is the likely impact of climate change on the Banking sector? Will those stress tests on climate rechannel the Investments to a more sustainable future? https://dial-mem.test.bib.ucl.ac.be/handle/2078.2/29963