Speeding up the Low-Carbon Economy Transition Can Support Financial Institutions’ Efforts to Mitigate Climate Risk

Financial institutions’ response to climate change by mapping out their risk from physical and transition risks is important. However, the speed of changes that financial institutions can make to limit their risk is constrained not by the risk metrics they look at but how quickly economic and social changes occur. To make the most impact on decarbonisation, financial institutions have to look at both the climate risks they face and the opportunities they can gain by scaling up financing the low-carbon economy.

Regulations like Malaysia’s new policy on climate risk management and scenario analysis have been important tools to mitigate climate risk in the financial sectorFinancial institutions will clearly be harmed by too slow progress on climate ch...