Soaring temperatures, natural disasters and rising sea levels are expected to have significant impacts on the property sector, increasing the risk of damage and destruction to homes, communities and businesses in Australia’s vulnerable regions.
That means big risk for financial institutions too.
According to the Intergovernmental Panel on Climate Change, the impacts of climate change are likely to be extensive and severe*. A report by McKinsey & Co. found “up to 15% of European bank balance sheets are at risk due to climate change, while Australian banks face similar challenges in the key industries, with potentially higher risks”**.
Not only does climate change threaten loss of collateral value due to environmental damage and destruction, but financial institutions can expect to see operational impacts, inflated running costs, disruptions to supply chains and IT infrastructure, write-downs on fossil-fuels related assets, increased regulatory constraints and reporting, and changes in consumer behaviour.
Add it all up and the impact to the bottom line is significant.
To address these growing risks, PEXA and SPP have developed a paper consolidating useful resources for climate change risk mitigation and planning relevant to Financial Services and Financial Institutions, including:
- A matrix for benchmarking against APRA’s climate risk management framework
- Best-practice industry exemplars to inspire action
- And a framework for building a compelling case for change
Download your free copy of ‘Climate Change – The Asset Imperative; Managing Climate Risk in Banking and Financial Services’, by accessing the link below.
*Collins et al. (2019), “IPCC Special Report on the Ocean and Cryosphere in a Changing Climate”, https://www.ipcc.ch/site/assets/uploads/sites/3/2022/03/08_SROCC_Ch06_FINAL.pdf
**McKinsey & Company (2020), “Banking imperatives for managing climate risk”, https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/banking-imperatives-for-managing-climate-risk