White Paper

Climate Risk Management at Financial Firms: A Good Start, But More Work to Do

May 29, 2019

Potential financial risks arising from climate change are an increasing area of focus, particularly for investors and regulators. To provide a benchmark for how mature firms are in their approach to climate risk management, in the first quarter of 2019, we undertook a global, cross-sectoral survey.

Our sample covered 20 banks and seven other financial institutions (comprising asset managers, insurers and financial market infrastructure companies) from across the globe. These firms have a global footprint, cutting across all regions. They collectively have about $20 trillion (USD) of assets on their balance sheets, manage assets of $12 trillion, annually process more than $1,500 trillion of securities and account for more than $1,300 billion in market capitalization.

The survey was structured around the main themes for climate risk reporting that have been developed through the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures. The topics covered included the governance and strategy to deal with actual and potential climate-related risks; the approach to risk management of these risks; metrics, targets and limits used to assess and manage climate-related risks and opportunities; the use of scenario analysis to understand the risks; and disclosures of climate-related risks.

Climate risk will affect different types of firms in different ways, reflecting the diverse nature of the firms’ business models. The range of practices reported cover the spectrum from firms that are at the forefront of climate risk assessment to those that are just starting on the journey. We developed a maturity model for climate risk management that shows this range at an individual firm level.