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Financial Firms Building Climate Risk Management Programs, According to GARP Survey

Global benchmarking study shows uneven progress in instituting essential climate risk capabilities such as governance, strategy and scenario analysis.
The Global Association of Risk Professionals (GARP)
2019-06-24 09:00 890

NEW YORK and JERSEY CITY, New Jersey, June 24, 2019 /PRNewswire/ -- Banks, asset managers and insurers have been scaling up their climate risk management programs to address the financial risks posed by extreme weather or environmental regulations, according to a new global survey conducted by the Global Association of Risk Professionals (GARP). The survey includes 27 major institutions with collective assets of approximately $20 trillion.

Among the participating firms, climate change has emerged as a significant area of focus, with more than 80% of institutions already having identified climate-related risks and opportunities. Further, to facilitate the transition to a low-carbon economy, 60% have introduced new offerings such as green bonds, while 40% have modified existing products.

"Financial institutions' treatment of climate risk has changed dramatically over the past five years," says Jo Paisley, Co-President of the GARP Research Institute. "Whereas they used to view climate change largely as a reputational risk, banks and other firms are now treating it as a financial risk and are formally integrating it into their risk management frameworks. As a sign of this progress, 26% of respondents now have a dedicated climate risk function."

However, the survey shows firms' uneven progress in developing core climate risk management capabilities such as governance, disclosures and scenario analysis. Although some respondents already have mature climate risk management frameworks, others have only just started the process.

Paradoxically, of those who were in the bottom quartile, nearly half described their climate risk approach as "strategic" or "comprehensive." Paisley says that without having tangible experience, these firms likely "don't yet know what they don't know," and will be more realistic in their self-assessment as their knowledge base increases.

Readers may peruse the full survey report, "A Good Start but More Work to Do," on the garp.org website.

About the Global Association of Risk Professionals

The Global Association of Risk Professionals (GARP) is a non-partisan, not-for-profit membership organization. GARP offers risk certification — the Financial Risk Manager (FRM®) and Energy Risk Professional (ERP®) — and educational programs for professionals at financial institutions, government agencies, central banks, academia and corporations. Through the GARP Benchmarking Initiative and GARP Risk Institute, GARP sponsors research in risk management and promotes collaboration among practitioners, academics and regulators to promote a culture of risk awareness. Founded in 1996, governed by a Board of Trustees, GARP is headquartered in Jersey City, NJ, with offices in London, Washington, D.C. and Beijing.

Contact: Kris Slethaug, +1 201-205-1773, kris.slethaug@garp.com

 

Source: The Global Association of Risk Professionals (GARP)
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