Banks wake up as physical risks of climate change rapidly grow
![Banks wake up as physical risks of climate change rapidly grow](https://sustainabilityeconomicsnews.com/wp-content/uploads/2024/04/15161134.jpg)
As banks strive to limit global warming to 1.5°C, they face increasing financial risks. With each temperature rise, the threat of economic upheaval grows, challenging the financial sector’s stability.
The Basel Committee on Banking Supervision warns that climate change goes beyond just environmental issues; it also threatens the core of banking operations.
The danger of loan defaults and weaker balance sheets highlights the urgent need for banks to address the significant financial consequences of a planet heading towards a warmer future.
“These events are happening more and more frequently, and so we need to be educated—to be risk-aware,” Gianluca Cantalupi, head of climate, nature and social risk at JPMorgan Chase & Co told Bloomberg News.
Also read: European Central Bank announces climate and nature plan 2024-2025
“I need to know the physical risks the bank might face when making lending decisions: Will a semiconductor company face water stress? Will logging in certain provinces cause landslides that destroy factories or other infrastructure?” Cantalupi added.
BloombergNEF analysts released a report in December revealing that companies are often unaware of the full extent of the impact extreme climate events can have on their operations, ranging from revenue loss to bankruptcy.
Their study examined over 2,000 companies and showed that 65% did not recognize potential vulnerabilities to physical risks within their operations. Moreover, only a small fraction of companies evaluated climate-related risks financially.
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