The role of financial institutions in addressing climate change

• Sunanda Vicent Jaiwant ^[1] ; Ajitha Haridasan ^[1] ; Joseph Varghese Kureethara ^[1]
  1. [1] CHRIST, Bengaluru, Karnataka, India
• Localización: Climate change and finance: navigating the challenges and opportunities in capital markets / Nader Naifar (ed. lit.), 2024, ISBN 978-3-031-56418-5, págs. 103-120
• Idioma: inglés
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• Resumen

  • Climate change is an impending danger that humanity has been facing for the past few decades. Recurring cyclones, floods, and severe droughts have become common across the globe and cause widespread destruction of resources, infrastructure, and human lives, resulting in large-scale displacement. Businesses and governments are becoming more aware of the significant effects that climate change will have on the finance sector. There are two primary ways that climate change impacts the finance industry. The first is a physical risk that results from harm to assets, facilities, and the environment. The second risk, known as the "transition risk," is brought on by modifications to public and economic sentiment, technological advances, and environmental legislation due to the transition to an economy with a lower carbon footprint. Exposures might differ greatly from one nation to another. Countries with low and average incomes are often more exposed to physical risk. Financial institutions contribute significantly through carbon pricing and other fiscal policies in decreasing emissions and raising funds. To partially offset the cost of natural catastrophes, financial institutions and markets offer financial security using insurance and other risk-sharing arrangements, such as catastrophe bonds. Financial institutions help activate funds for investing in climate mitigation activities and developing resiliency to climate change as responsible responses to financial warnings, such as carbon prices. Financial institutions have begun implementing various green banking measures to reduce the adverse effects. They are attempting to solve the difficulties that are imminent, particularly from the perspective of risk management, and have created environmental policies and launched a variety of green financial instruments. The study describes financial institutions' key role in mitigating climate change and contributing to climate action initiatives. It deliberates upon the improvement limitations and probable prospects of scaling up climate finance by the financial institutions.