ongoing supervisory activity. Financial institutions will need to start assessing their exposure to climate risks. This ranges from assets stranded by tightening climate policy to the implications of carbon pricing on their clients’ creditworthiness and to the physical impacts of climate change on the assets that they have financed or insured.
Voluntary action also has its place, and the financial services sector has a long history of incorporating environmental and social issues into its business. The Montreal Carbon Pledge – a pledge by investors to measure and disclose the carbon footprints of their portfolios annually – is also gaining traction, with nearly 70 signatories so far.