The impact of climate change, however, is not purely environmental. These new climate events also have a very strong impact on global financial systems. As we inch ever closer as a society to the point of no return, financial institutions and banks the world over are beginning to realize action is in their best interest. They are realizing that business as usual is risky business. So how does green finance play a role in saving the planet?
Banks Wrestle with Climate
As financial institutions wrestle with how to best classify the risk of climate change, dynamics are changing. The global economy is going under a transformation – and many are moving to best reposition themselves.
The Bank of England, along with 34 other central banks, accounting for two-thirds of the industry-leading banks and insurers, have called upon relevant stakeholders to integrate financially-related climate risk assessments into their everyday work. They, furthermore, encouraged the incorporation of sustainability and green finance into their portfolio management practices.
The risk of climate change is no longer an abstract idea. According to a report by the CDP that compiled survey data from 215 of the world’s largest companies, climate change is estimated to cost companies approximately $1 trillion. Damages and disruptions resulting from unpredictable weather patterns, rising sea levels and hotter temperatures are among the main culprits.
“Business as usual is risky business.”
For the first time in the history of the World Economic Forum’s Global Risk Perception Survey, climate-related risks dominate the “long-term risk” as well as the “impact” categories. Factors such as extreme weather, climate action failure and biodiversity loss rank among the riskiest and most likely.
With destruction becoming an eerie norm, insurance could become out of reach for many individuals and businesses that need it most. The insurance industry has already suffered significant losses due to an increase in claims related to climate change-empowered natural disasters. This is just one of many industries already bearing the brunt of climate change.
Green Finance: Our Way Forward
Climate change is urgent and should be taken as such - but it doesn’t have to be all doom and gloom. With a changing world come new opportunities and climate change is no exception.
An effective and comprehensive solution to global warming is going to take an army, mobilized from many different fields and industries. Paramount among them is finance. The global finance community has capacity to fundamentally reshape the course of this crisis through sustainable finance practices. Missing thus far has been a big enough incentive to engage in green finance and markets. That incentive has arrived.
There is an estimated potential of $2 trillion in green finance, accelerated by climate change. Demand for green technologies, such as electric vehicles and renewable energies, has grown faster than expected. These, in turn, provide excellent sustainable finance opportunities that are resilient and long-lasting.
The future of finance is green, because it needs to be. While the health of the planet and moral obligations play an important role, the financial risks associated with the failure of climate action are just too substantial to ignore nor are the exciting possibilities green markets offer.
“Climate change doesn’t have
to be all doom and gloom.”
We stand at a once-in-a-lifetime crossroad. The cutting-edge frontier of this industry is green finance and ecolytiq provides you with a sustainability-as-a-service solution to meet your needs. By harnessing the single best pool of data to influence personal consumption, i.e. individual payment data, we provide your customers with customized ESG investment portfolios that take the guesswork out of green finance. With our software, we allow you to empower customers with a value-added benefit – a service that distinguishes you from competitors.
Take this opportunity to reflect on the current state of the world. Let us help you build the bridge between your company and sustainable finance. There has never been a better time to take action, ensuring your longevity.
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Authored by Max Honzik, PR & Content Manager at ecolytiq