Big Banks Band Together to Measure and Manage Climate Risk

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A consortium of 19 banks to develop standards to integrate climate risk management across their operations

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The formation of the consortium follows a recent call by senior US banking executives to ask financial institutions to more comprehensively weigh the risks associated with the changing environment. The RMA said the consortium intends to continuously develop frameworks and standards for climate risk management.

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“When you think about climate change, and then you think what the science is telling us is going to happen, it will literally have impact and impact on a broad spectrum of industries across geographies,” says Mary Obasi said. Climate risk executive at Bank of America who chairs the consortium.

Ms Obasi said: “I think it’s appropriate for us – just like we do with any other area of ​​risk – to really understand what could happen, what could happen, and then Build our processes to manage it well.”

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Banks can play a major role in the transition to a so-called net-zero economy, said Nancy Foster, president and chief executive of RMA, an organization that serves risk professionals in financial institutions.

“This is a huge problem for all of us to deal with,” Ms Foster said. “I think it’s very important for banks to lead the opposite response.”

Ms Foster said banks may eventually be involved in not only determining, for example, which assets are at risk for weather events, but also in collecting data on their customers’ carbon emissions. He compared the scrutiny expected of banks to their role in tackling money laundering by criminals.

“Banks argued for a long time, it was not their role to monitor bad actors on behalf of the government, but it is the role they play,” she said. “They already are — I don’t like to call it the police business — but they’re already doing it today.”

However, Ms Foster said it was too early to know how consortium action might affect a bank’s policies.

Many large banks have sought to position themselves as leaders in efforts to control carbon emissions. Most of the world’s big banks and their regulators last year pledged to fund a change that would reduce the carbon footprint of businesses.

Some activists have questioned the integrity of the banks’ commitments, while more conservative observers argue that banks should provide services to all legal industries, including fossil-fuel extraction.

Write Richard Vanderford at [email protected]

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