Near-term Economic Climate Change Impacts “Harder to Ignore”

New report says the near-term impacts of climate change are becoming ever harder for financial institutions to ignore.

The UN Environment Programme Finance Initiative and UK-based think tank National Institute of Economic and Social Research (NIESR) have published a report exploring short-term climate-related shocks for financial actors with macroeconomic models.

The report features three climate-driven macroeconomic shock scenarios – a sudden rise in the carbon price, an oil price hike and a trade war – developed by UNEP FI and NIESR as part of UNEP FI’s Taskforce on Climate-related Financial Disclosures (TCFD) Programme.

The report notes that macroeconomic impacts caused by climate change may create significant credit, market, and operational risks for financial institutions, warning also that “near-term impacts are becoming ever harder to ignore”.

“The interconnectedness of the global economy means climate-related impacts in one area can have ramifications across the world,” says the report. “Near-term transition risks can also create systemic instability as many incumbent industries, such as fossil fuels, will face existential changes.”

The report, published here, offers suggestions for the financial sector on enhancing climate scenario analysis.

Read more articles like this on Regulation Asia’s sister publication, ESG Investor.

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