Climate Risks in the Banking Industry: Theories, Regulations and Practices

As climate change intensifies globally, it also poses unprecedented challenges to the banking sector that require attention. This book examines how climate risks are reshaping the banking industry. Unlike the existing literature, which is mostly practitioner-oriented, this manuscript provides readers with a detailed and research-based analysis of both physical and transition risks, bridging the gap between climate science and banking theory from a global perspective. Climate Risks in the Banking Industry seeks to examine the development of these issues through different lenses by asking some important theoretical and practical questions. Is it possible to establish an academic framework for the transmission of climate risks through banking systems, and what empirical evidence supports these theoretical models? What regulatory approaches are being developed globally to address climate-related financial risks, and how do these differ across jurisdictions? How are financial institutions implementing climate risk management frameworks in practice, and what are the challenges in translating theoretical models into operational tools? In line with the above objectives, this volume provides a framework that maps the existing academic research on climate risks in banking and offers a basis for future studies and practical applications. It includes an in-depth comparative analysis of international regulatory responses to provide a truly global vision.

The book also examines how physical and transition risks affect different banking businesses and products, assesses current risk methodologies and their limitations, and proposes innovative approaches for integrating climate considerations into existing risk management frameworks. It can serve as an important resource for academics in banking, finance and environmental studies, while also providing valuable implications for policymakers, regulators and advanced students.