G-20 Study Urges Finance Firms to Better Assess Environment Risk

Financial institutions should improve the way they assess risks to their operations from environmental threats.

"Inadequate understanding of growing environmental sources of risk could allow threats to financial institutions to accumulate and limit progress towards sustainable global growth," the U.K’s Cambridge Centre for Sustainable Finance said in the paper. 

The study was commissioned in January by the G-20’s Green Finance Study Group as part of efforts to stimulate more sources of private finance for environment-friendly projects, such as via the development of green bond markets.

At their meeting in Hangzhou, China, G-20 leaders discussed climate issues, as well as ways to jump start growth which slowed to 2.7 percent last year in the group’s economies.

The study highlighted a number of challenges in the way of improving risk assessments by financial firms. Information on credit default risks stemming from green policy changes might require the collaboration of finance, environment and policy specialists, which "can be costly and time-consuming," the study said.

Understanding Data

Lack of data is also a problem. To understand risk stemming from a drought, for example, financial institutions would need data on ownership rights in the affected region and the water intensity of companies operating there. Financial institutions also need to create the ability to understand and use the data, according to Andrew Voysey, one of the authors of the study.

Source: Bloomberg Markets

Media

Taxonomy

• Environment
• Environmental Consulting
• Environment
• Investments