Framework for Integrating Climate Risk Into Financial Risk Management
Central banks and financial regulatory bodies around the globe have proclaimed the need to implement climate policy via financial regulations. The regulatory pronouncements, however, have been scant in the details of how financial institutions can practically incorporate climate risk into their risk management processes that had been built around managing macroeconomic and financial risks that is the foundation of financial stability and capital adequacy standards of regulatory regimes around the globe. This perspective examines how a financial institution might create a process and procedures that systematically identify climate risks and incorporate them into the existing financial risk management systems.