The (Un)Surprising Impact of Climate Change on the Financial Sector

Climate change has had a telling impact over the last decade or so. Natural disasters in the recent decades are telling of the havoc climate change can create on the environment, our lives, and the world economy. Countries and corporates are taking note and planning their way towards a lower carbon strategy. The financial sector, particularly, finds itself in a precarious situation, owing to the diverse segments it caters to. For starters, climate change has a direct implication on risk exposure for the financial sector (banks, financial services and insurance companies / BFSI). Therefore, it makes sense to evaluate investments from an ESG (Environmental, Social and Governance) perspective to manage risk. But it’s not just about minimizing risk. The financial sector can contribute substantially to our transition to low-carbon economy through the creation of relevant financial instruments.