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Climate Risk Management in FIs: Pathway to a Sustainable Future

Zeeshan Rashid

Global Head - Risk and Compliance Advisory and LIBOR Transition, Banking, Financial Services, and Insurance, TCS

Navin Rauniar

Lead – LIBOR Transition, Banking, Financial Services, and Insurance, TCS

Piyush Srivastava

Partner, Capital Markets & Risk Management, Banking, Financial Services, and Insurance, TCS

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A strategy that financial institutions can adapt to manage climate change risks

Climate change, with its capacity for large-scale impact on the environment, businesses, and human lives, is an event, which makes the need for climate risk management urgent and unavoidable for governments and corporations alike. Financial risks from climate change fall in two broad categories – physical and transition. Models will need to evolve to capture the relationship between the two as accurately as possible, to be able to design the appropriate mitigation measures. In our view, financial institutions must adopt a structured approach across four key dimensions — understand, accept, act, and deliver — to define their climate risk strategy.

  • Understand – the cost and impact of inaction on their organization and portfolios
  • Accept - climate risk as a mainstream financial risk is a necessary step for financial institutions
  • Act – clearly defining the expected actions from each group will be key to success
  • Deliver - a climate-resilient firm with mature capabilities

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