IFC Announces ClimaLab Initiative for European Financial Institutions to Manage Climate Risks

The International Finance Corporation (IFC), a member of the World Bank Group, is launching a program to provide European financial institutions with the knowledge and tools needed to handle climate-related risks.

According to World Bank’s research, the nonperforming loans could increase by 0.37 percentage points following severe climate and environmental disaster.

Considering this, the European Union regulatory framework is pushing for banks to consider climate risk in their decision-making and focus on managing risks in their loan portfolios while supporting sustainable initiatives.

IFC is launching ClimaLab, an initiative partnered with the Dutch government, to help financial institutions devise a climate risk management strategy.

ClimaLab will offer a range of programs for various regions to help banks enhance their capacity for climate resilience and include climate and sustainability measures into their operations.

The initiative aims to help banks understand the impacts of climate risks on their portfolios, explore sustainable investment opportunities and devise strategies for transitioning to a low-carbon economy.

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Liliana Pozzo, IFC Sustainable Finance Advisory Services Manager said, "Climate change poses a significant financial risk to economies, and financial institutions play a crucial role in mitigating this risk."

She added, "Through ClimaLab, we aim to empower banks and other financial institutions to not only navigate the complexities of climate risk but also seize the opportunities that arise from the transition to a low-carbon economy."

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IFC is commencing ClimaLab with a few regional banks in November to refine its curriculum and materials, focusing on climate risk management and the goals of the Paris Agreement.

Developed in collaboration with Management Solutions, an international business consulting firm, the program will guide financial institutions in assessing climate-related risks, integrating them into sustainability reports, and developing transition strategies that meet regulatory expectations.