The creditworthiness of high transition risk borrowers may degrade as more ambitious climate policies are enacted Rabobank is the new poster child for climate transition risk in the financial system. In response to the Dutch government’s June announcement of a plan to slash nitrogen oxide emissions from the country’s livestock sector, the lender downgraded the […]
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Why climate models struggle with acute physical risks
Climate models have a major blind spot: they can’t see extreme weather-related risks. This is a big problem for financial institutions, since these kinds of threats — also known as acute physical risks — could hammer their investments and sap their capital. But despite their shortcomings, financial supervisors are already using these flawed models to […]
US Inflation Reduction Act Unlocks Climate Opportunities
A brighter climate future is here. On August 16, US President Joe Biden signed the Inflation Reduction Act, which includes USD$369bn in climate change and clean energy investments. That’s the most the US government has ever spent to address global warming. Expert analysis shows the legislation should cut US emissions by around 40% by 2030, relative to […]
Climate Trends: Manifest Climate Data Reveals Gaps in Companies’ Emissions Disclosures
Companies are under growing pressure from investors, customers, and regulators to disclose their greenhouse gas (GHG) emissions. This data is essential for understanding just how much each business contributes to climate change and for establishing credible emissions-reduction targets, a key part of any organization’s broader climate plan. It also allows companies to benchmark their progress […]
GFANZ Wants to Whip Portfolio Alignment Metrics into Shape
Our climate future is unknown territory. Still, financial institutions want to plot a course to its coolest fringes. Hence the buzz over portfolio alignment metrics (PAMs) — the measurement systems firms can use to understand what investment, lending, and underwriting activities support a 1.5°C warming pathway. Banks, asset managers, asset owners, and insurers want PAMs […]
Climate risk regulation rundown: July 2022
What happened in climate-related financial regulation last month, and what’s coming up The Financial Stability Oversight Council (FSOC), the US’ top financial regulatory body, received an update on its member agencies’ efforts to combat climate-related risks at a meeting on July 28. The FSOC published a factsheet following the meeting outlining the “considerable progress” made advancing the panel’s recommendations on […]
Yes, the FSOC *is* a tool to address climate change
The regulatory body has an explicit duty to respond to emerging threats to the stability of the US financial system. Climate change is one such threat. US financial regulators have been playing catch up on climate risk for much of President Biden’s time in the White House. By some measures, they have made good progress since […]
What OSFI’s Draft Climate Risk Guideline Means for Canadian Financial Institutions
On May 26, Canada’s federal financial regulator released a draft guideline that outlines how nationally regulated financial firms should both manage and disclose their climate risks. As part of the draft guideline, the Office of the Superintendent of Financial Institutions (OSFI) lays out six climate governance and risk management principles, as well as six climate-related […]
How herd behavior could imperil the low-carbon transition
Financial stability risks could arise if banks and investors all take the same route to decarbonize their portfolios “When the herd moves, it moves.” UK Prime Minister Boris Johnson used this phrase in his July 7 resignation speech to describe how political support flooded away from him in the wake of one too many scandals. It is also […]
How the TCFD Stacks Up Against Other Sustainability Frameworks: A White Paper
There are plenty of sustainability frameworks for companies to adhere to when it comes to reporting their climate-related risks and opportunities. However, the Task Force on Climate-related Financial Disclosures (TCFD) ranks ahead of the others and is the gold standard when it comes to climate reporting. What are the most common sustainability frameworks? Our white […]