Banner Climate Risks

Climate Risk for Development

Climate change, and society’s response to it, present financial risks and opportunities to financial institutions and corporates. These risks, or opportunities, can stem from two primary channels:

  • Physical risks arise from the physical effects of increasingly severe and frequent climate and weather-related extreme events such as droughts, floods or hurricanes, and from longer-term progressive shifts in climate patterns such as increasing mean temperatures and changes in precipitation. These events can result in direct damages to property and other infrastructures, disrupt supply chains or impact of agricultural output, thereby reducing asset values and companies’ profitability.
  • Transition risks arise from the process of adjustment towards a carbon-neutral economy and be prompted by changes in policy, regulations, technology, or market sentiment. Policy changes could for instance take the form of restrictions on carbon emissions, the implementation of carbon pricing or the tightening of energy efficiency standards. These changes can translate in rapid reassessment of a wide range of asset values through unanticipated or premature write-downs of carbon-intensive industries.
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Scope of Activities

The IDB Group supports its clients in identifying, assessing, and managing climate-related risks and opportunities. It does so through an integral offering encompassing:

Innovative Solutions

Financial and non-financial solutions supporting investments in climate solutions.

Business Models

Design and piloting of innovative business models.

Task Force on Climate-related Financial Disclosures (TCFD)

Implementation of the TCFD’s recommendations.

Thematic Bonds

Issuance of thematic bonds.

Intersectoral Dialogue

Promotion of public-private dialogues on the topic through its Innovation LABs, and actively foster international knowledge sharing.


IDB Group’s climate risk-related support activities

 

Why climate risks?

Climate-related risks influence the characteristics of traditional risk types and affect how those risks impact financial institutions. For banks, for instance, climate-related risks can manifest as increased credit risk, market risk, liquidity risk and operational risk. .

Primary channels for climate-related financial risks


Climate-related risks and opportunities


Climate-related risks and opportunities

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Managing climate risk allows overcoming barriers such as:

  • Financial instability due to climate change
  • Reduced asset values and companies’ profitability due o physical effects of increasingly severe and frequent climate and weather-related extreme events
  • Lower ratings by agencies as climate risk factors are incorporated into their credit rating opinions
  • Rapid reassessment of a wide range of asset values through unanticipated or premature write-downs of carbon-intensive industries given an adjustment towards a carbon-neutral economy, prompted by changes in policy, regulations, technology, or market sentiment


 
Resources
  • Stay updated on the latest trends of Green Finance

Building Climate Resilience: AT&T’s pioneering approach to tackle Climate Risks

With the growing frequency and severity of extreme weather events, climate change threatens AT&T´s infrastructure and adds hundreds of millions of dollars to the cost of disaster recovery.That’s why, in addition to their commitment to reach carbon neutrality, is working to make the company more resilient to the impacts of climate change on future generations. They've been collaborating recently with climate experts to develop an industry-leading Climate Change Analysis Tool (CCAT), that visualizes and projects which neighborhoods and which pieces of infrastructure will be at risk in the future. Using detailed maps, their aim to improve the resilience of the network so they customers can continue to count on vital network connections in the aftermath of future disasters. They’re also sharing their climate data publicly so that communities can take steps to prepare and build climate resilience for their citizens.


Events


BIODIVERSITY IN ENVIRONMENTAL IMPACT ASSESSMENT

This course provides a knowledge base on accepted good practices for the effective incorporation of biodiversity into the...



 

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  • Bioeconomy
  • Private Sector
  • Green Social and Thematic Bonds
  • Green Finance
  • Climate Risk
  • Blue Economy
  • Green Bond Transparency Platform
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