2020 Global Benchmarking Survey Reveals Growing Prioritization of Climate Risk Management
Banks and other financial institutions are intensifying their focus on climate risk management according to a new global survey conducted by the Global Association of Risk Professionals (GARP). GARP found that 90% of firms have board-level governance of climate-related risks and opportunities, up from 81% in 2019, but only 30% feel their firm’s strategies are resilient against climate change beyond 5 years.
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“Firms are evolving their climate risk management capabilities as they are concerned about the long-term resilience of their business strategies to climate change.”
GARP conducted its second annual Global Benchmarking Survey, featuring participation from 71 leading financial institutions around the world — almost triple the number in 2019 — including banks, asset managers, insurers, and other firms with a total market capitalization of $3.8 trillion.
The survey found that several barriers and challenges exist to addressing climate risk within financial services. In the short term, the biggest concern for most firms is the lack of reliable models for climate risk, followed by regulatory uncertainty, as regulators have begun to set formal expectations for firms’ practices in this area.
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Scenario analysis is an important and valuable tool firms can utilize in developing climate-change strategies, but only a small fraction (14%) of the firms surveyed are using scenario analysis regularly, and of those who have used it at all, only 54% have acted based on the results of the analysis.
“Banks and other financial institutions are recognizing the potential impact of climate change on their balance sheets and operations, which will lead to both risks and opportunities,” said Jo Paisley, Co-President of the GARP Risk Institute. “Firms are evolving their climate risk management capabilities as they are concerned about the long-term resilience of their business strategies to climate change.”
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