Climate Change Risk Management in Financial Institutions: Strategies and Challenges

Abstract

The operational stability and long-term survival of financial institutions are both impacted by climate change, which presents major hazards to these organisations. In this article, we take a look at the ways that financial institutions are handling the risks associated to climate change and the obstacles that they're facing. We identify important ways used by financial institutions and investment enterprises to integrate climate issues interested in their decision-making processes through analysing existing risk management frameworks. Sustainable investment portfolios, scenario analysis, and climate risk assessment methods are highlighted in the paper. To further improve openness and responsibility around climate threats, it delves into the reporting and regulatory mandates placed on financial institutions. Data deficiencies, methodological ambiguities, and the need for improved cross-sector cooperation are some of the obstacles that institutions encounter despite progress. In order to better manage climate risk, this article discusses strategies to improve current procedures and solutions to overcome current obstacles. The results add to our knowledge of how banks and other financial organisations might meet the challenge of climate change's monetary effects while also working towards universal sustainability objectives.