This paper is an introduction to climate change risk for the financial sector (banks and investors). We propose to cover how it emerged, what it means for financial institutions, what are the specific types of approaches to address it as well as current related developments in the industry, how regulation is approaching the question, and what are the next steps for academic research. The paper is aimed at financial professionals, researchers and policymakers in the area of banking and investment who seek to understand where this new field of research currently is and what evolutions are to expect. The paper’s ambition is to provide the reader with a snapshot of the current state of the art and guidance on the relevant literature to go further.
Adopting disruptive technologies for decarbonizing hard-to-abate industrial sectors requires experimentation through demonstration (pilot) projects. However, from an economic perspective, the potential long-term benefits and the difficulties in designing relevant public policies are not addressed in the standard valuations of those projects.
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