Jakarta – A new report has revealed that most global banks are unprepared for the increasingly real threat of the climate crisis. According to a study conducted by Climate X, a climate risk analysis company, 88 per cent of the world’s top 50 commercial banks are not adequately prepared for the impacts of climate change that could potentially disrupt their operations and businesses.
The report “The Top 50 Banks in the World Tackling Adaptation (2024),” released on October 15, 2024, amid growing concerns over the impact of climate change on the financial sector, reveals a huge gap in the preparedness of global banks to adapt to climate change.
The findings noted that banks based in Europe and the UK performed better regarding adaptation readiness, largely thanks to stricter regulation. However, North American and Australian banks still need to catch up in preparing for climate-related risks.
Climate X CEO Lukky Ahmed explains the importance of climate adaptation in banking. He says climate adaptation is no longer an option but an imperative for the financial sector. Ahmed says the report shows that while some banks have started taking steps to prepare for a warming world, the majority still have a long way to go.
The study uses 17 qualitative indicators that evaluate each bank’s climate adaptation strategy, including strategic alignment, implementation and progress monitoring. Kamil Kluza, COO of Climate X, added that most banks do not have clear metrics to measure the impact of climate adaptation.
He said many banks have not established lending strategies supporting communities and businesses affected by climate change, and their transparency and actions are still very limited.
The report highlights that banks’ role in financing climate resilience and adaptation is becoming increasingly important as the frequency of climate disasters increases and environmental change progresses. While the financial sector has been focusing on mitigation, adaptation is considered a crucial step to protect the economy from the inevitable impacts of climate change.
Ahmed adds that banks must incorporate adaptation into their strategic decision-making processes and create products and services that support economic resilience.
If these banks continue to delay action, the consequences will impact their financial sector and the global economy as a whole. This Climate X report highlights the increasingly real threat to the global economy if the banking sector does not quickly adapt to climate change. With the climate crisis becoming more urgent, banks worldwide are faced with a huge responsibility to play a leading role in supporting the resilience and adaptation of the global economy. (Hartatik)
