International Finance Corp., a member of the World Bank Group, announced on Monday the launch of ClimaLab, an initiative to equip European financial institutions to tackle climate-related risks.
According to a statement, IFC launched the climate risk management plan in partnership with the government of the Netherlands.
The plan comprises a range of climate-focused programs designed to help banks build capacity for climate resilience and better integrate sustainability measures into their management.
The aim is to enable financial institutions to develop the knowledge and skills necessary to understand the impact of climate risks on their portfolios, explore opportunities for sustainable investments, and design robust strategies for their transformation journey.
Perfect storm
Climate-related disasters across Europe caused losses of about €15.5 billion ($17.14 billion) per year from 1980 to 2022. Losses of financial institutions have also been significant.
The World Bank’s global research shows that non-performing loan ratios are estimated to increase by 0.37 percentage points after severe climate and environmental disaster episodes.
The statement said the region’s projected climate change impacts call for urgent action to improve resilience.
Therefore, the European Union regulatory framework encourages banks to integrate climate risk in decision-making and focus on managing risks in their loan portfolios while financing sustainable initiatives.
The Road Ahead
“Climate change poses a significant financial risk to economies, and financial institutions play a crucial role in mitigating this risk,” said Liliana Pozzo, manager of IFC Sustainable Finance Advisory Services in Latin America, the Caribbean and Europe.
“Through ClimaLab, we aim to empower banks and other financial institutions to not only navigate the complexities of climate risk but also seize the opportunities that arise from the transition to a low-carbon economy.”
The official cohort of ClimaLab in Europe will start in November and focus on climate risk management and the Paris Agreement goals.
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