Risk warning to banks due to global warming

US management consultancy Bain & Company and Jupiter Intelligence assessed the 50 largest banks in terms of total global assets and warned that banks should adapt their lending strategies to take into account rising global warming risks.

The research revealed that banks that factor climate change-related physical risks into their mortgage lending strategies are in the minority.

Emphasizing that the consequences of climate change are becoming more apparent and that banks need to start paying attention lest they be caught unawares, the research said: “Based on the analysis, mortgage portfolios may suffer losses of 10 to 15 per cent in terms of collateral damage.

“Physical risks are expected to increase globally, with different intensities and impact rates across countries,” the research said.

‘PROFITABILITY MAY DECREASE BY 7-10 PERCENT’

The study includes banks currently affiliated with the Financial Stability Board’s (FBS) Task Force on Climate-Related Financial Disclosure (TCFD).

The analysis of European banks revealed that only 18 percent integrate physical risks into their mortgage issuance strategies.

In other words, the vast majority of European banks have yet to incorporate physical risks into their strategy definitions, supervisory processes, target setting, product delivery, or customer engagement.

Bain and Jupiter also simulated the potential financial implications for a European-based bank, revealing the impact these changes could have on banks’ assets and profitability.

It was noted that the mortgage collateral values ​​of the sample bank in question could decrease by 10 to 15 percent if no mitigation measures are taken. This can reduce the mortgage profitability of these banks by 7-10 percent.

’43 PERCENT OF US LAND IS IN DANGER’

The research also shows that there is a growing number of lands that are expected to face the dangers of physical risk around the world.

The following statements were noted in the research, which was called “43 percent of US land is currently under physical danger, this rate is expected to reach 65 percent by 2050”:

“This proportion, which is currently 31 percent in Indonesia, is estimated to increase to 97 percent by 2050. European countries show a similar increase in the same time period. Germany’s land at risk is forecast to rise from 33 to 68 percent, and Italy’s at risk from 40 to 62 percent.

‘THE ADDRESSES RELATED TO THE SUBJECT IN Türkiye SHOULD BE INCREASED’

Camille Goossens, Senior Partner at Bain & Company and Head of the firm’s Sustainable and Responsible Financial Services department, commented:

“While climate change is having a profound impact on real and personal property around the world, no market will be immune to it. Currently, the strategies of banks to find solutions to the risks of climate change are quite limited”.

Onur Kayahan, one of Bain Istanbul’s partners, said that the banking sector in Turkey is showing more and more interest in such transformation and climate risks, but said: “We hope that this issue will come to the fore and guidance and guidance will increase “. .”