In the banking industry, climate change was historically considered in the context of corporate social responsibility and environmental stewardship, where it was theorized that discussing and managing climate risk would improve a bank’s reputation and help ensure that it does not become an outlier with respect to its policies and disclosure. However, it has become apparent that climate change may also pose significant financial risks for banks and that it should be analyzed and scrutinized accordingly.
Recognizing that the needs of their clients, shareholders, and other stakeholders are shifting, more than 185 banks have committed to the United Nations Environment Programme Finance Initiative’s (UNEP FI) Principles for Responsible Banking since its origin in late 2019. The Principles provide a framework for ensuring that signatory banks’ strategies and practices align with the Sustainable Development Goals and the Paris Climate Agreement. In this context of widespread support for the Paris Agreement in the banking industry, investors are increasingly scrutinizing companies that continue to invest in resources that carry the greatest climate-related risks.
Glass Lewis’ new In-Depth: Carbon Asset Risk report explores the risks to banks that engage in project financing activities in emissions-intensive and scrutinized areas including Arctic oil and gas, coal, and tar sands. For each of these fossil fuel resources, recent examples have demonstrated that the risks are growing and recognized by the public, reinforcing the need for a new perspective on the financial implications of climate change. These climate-related risks fall into two categories: physical and transition risks. While the industry is banding together to better understand these risks, regulators are also in the earliest stages of looking at how to enhance corporate climate risk disclosure. Our report lays out crucial background and context for understanding what’s happening, and what’s at stake.
In-Depth: Carbon Asset Risk is available now. Glass Lewis customers can access the report on Viewpoint view the Help & Resources menu, or Governance Hub, or contact their Glass Lewis Representative for more information.
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