Climate change is increasingly recognized as an existential threat that entails significant financial risk as well. Hence, many financial institutions are keen to better measure and manage climate risk. However, they are struggling to get this done in a meaningful way.
The reasons for this struggle are interrelated: a lack of understanding, a lack of priority, and a lack of resources put to the task.
Climate risk is poorly understood
It starts with a lack of understanding: many financial professionals implicitly assume that climate risk is easily quantified and inserted into current models. However, the nature of climate risk actually…
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