ANNOUNCEMENTS
Climate change poses significant and evolving risks to the global financial system, impacting asset valuations, investment decisions, and overall financial stability. This Report aims to explore the financial implications of climate-related risks and examine how financial institutions, and Risk Managers can mitigate these challenges effectively. the study focuses on two core objectives to provide a comprehensive yet manageable analysis.
The first objective centers on assessing the impact of climate-related financial risks—specifically physical risks arising from climate events and chronic environmental changes, and transition risks associated with the shift to a low-carbon economy—on asset valuation and investment strategies. Through a detailed review of financial reports, market data, and relevant case studies, the study evaluates how these risks influence asset pricing, capital allocation, and investor behavior. Additionally, it investigates how climate risk drivers translate into traditional financial risk such as credit risk. Understanding these transmission channels is critical for integrating climate considerations into conventional financial risk frameworks and enhancing risk management practices.
The second objective focuses on evaluating the risk management strategies employed by financial institutions to address climate-related risks. This includes an examination of scenario analysis, and portfolio diversification techniques used by banks, insurance companies, and investment funds. The study assesses the effectiveness of these approaches in embedding climate risk into decision-making processes, thereby improving institutional resilience and promoting sustainable finance.
By addressing these objectives, the research aims to bridge the gap between climate science and financial risk management, offering actionable insights for stakeholders. The findings will contribute to advancing knowledge on how climate-related risks affect financial markets and provide guidance on integrating these risks into risk assessment and mitigation frameworks, enabling more informed investment decisions in an era of climate uncertainty.
Keywords: Physical Risk,Transition Risk,Credit Risk,Scenario Analysis,Financial Risk Management.
