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The heat waves experienced in Europe in the summer of 2019 are symptoms of a climate change that is already underway. These events may cause losses for banks and other financial institutions, which will therefore have to take into account the consequences of climate change in their decisions. Regulators are also pushing in this direction. However, practical difficulties have been raised by financial institutions, to the point of wondering whether the management of so-called "physical climate risks" was not mission impossible. I4CE experts have spent the last 3 years studying these difficulties and the set of challenges that financial actors must overcome to learn how to analyze and manage these risks. They have done so in France and elsewhere in Europe, as part of a major European project that is coming to an end. So, mission impossible?
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Indeed, banks are able to manage physical climate risks
For Romain Hubert from I4CE, banks can overcome technical difficulties and start managing physical risk. However, this will require human resources, inside and outside these financial institutions. He also poses a key question for the future: who will pay the cost of financial risk related to climate impacts?
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Vidéo #2minOn #PhysicalClimateRisk
You still haven't understood what a physical climatic risk is? Or why it is difficult for a bank to analyze and manage this risk? Romain Hubert from I4CE explains all this in a few minutes.
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Addressing challenges of physical climate risk analysis in financial institutions
I4CE and CICERO synthesize in this report the practical lessons of 3 years of collaboration between experts and financial institutions. Much work remains to be done, and the authors recommend, among other things, that financial actors launch experiments on their own portfolios, and collaborate more with the rest of the ecosystem: regulators, supervisors, scientists, service providers, municipalities...
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ClimINVEST – Tailored Climate Information for Investment Decisions
Within the framework of the European ClimINVEST project, climate experts worked together with financial institutions from the Netherlands, Norway and France. Many practical resources are now available, free of charge, to help financial actors manage physical climate risk. For more details on the project, its partners and results, visit our ClimINVEST Project page.
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The ClimINVEST European Consortium
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