Publication: Climate Risk and Financial Institutions: Challenges and Opportunities
Date
2011
ISSN
Published
2011
Author(s)
Stenek, Vladimir
Amado, Jean Christophe
Connell, Richenda
Abstract
This report analyzes in some detail the
risks to project finance and the performance of real-sector
investments. Options, futures, derivatives, foreign exchange
and more exotic instruments are not specifically addressed.
The objectives of institutional investors, such as pension
funds, include creation of sustained revenues over a long
period of time. Clearly, given this long-term perspective,
institutional investors need to be particularly aware of
growing risks to their investments in climatically sensitive
sectors or regions. This report demonstrates that climate
change and its impacts are likely to alter a number of
conditions that are material to the objectives of financial
institutions. If changing conditions are not actively
managed, investments and institutions may underperform. Most
investments will be channeled through financial
institutions. Given that the main effects of climate change
are now well established, there is a considerable
opportunity, as well as a responsibility, for these
institutions to take a leading role in adaptation to climate
change. Institutions managing investments in long-lived
assets have both a direct financial risk to consider and the
opportunity to create value by working proactively with
their clients and other stakeholders to take steps to manage
the risks. Going forward, International Finance Corporation
(IFC) will initiate the development of more general tools
addressing climate risks and investments.
Citation
“Stenek, Vladimir; Amado, Jean Christophe; Connell, Richenda. 2011. Climate Risk and Financial Institutions : Challenges and Opportunities. © International Finance Corporation, Washington, D.C.. http://openknowledge.worldbank.org/handle/10986/27888 License: CC BY-NC-ND 3.0 IGO.”