The multiple impacts of climate change are being felt in the global economy with increasing force and through a number of interconnected pathways. The approach chosen by Finnish actors in the financial sector to date, have generally been reactive and defensive – consisting mainly of carbon footprint assessments and occasional divestments from fossil based assets. The recent study Proactive management of weather and climate related risks (ELASTINEN) commissioned by the Prime Minister´s Office, Finland, notes that only few actors in the Finnish financial sector – in banking, insurance and investment services– have comprehensively assessed the climate risks of their customers and proactively investigated the possibilities to support the climate adaptation of their customers.
The experiences of international forerunners could and should inspire also actors in the Finnish financial sector to better understand the climate risks in a dramatically changed + 2C degree world we are heading towards, but even more importantly, help turn the financial sector into a driver and facilitator for the required societal transformation towards a carbon neutral and climate resilient future.
Various tools are already at the disposal for actors in the financial sector to conduct “2 degree stress testing” of their portfolios, as part of more responsible investment strategies and approaches. A number of governments are also considering and/or introducing policies and regulation to encourage the financial sector become an active solutions provider and driver for climate compatible development.
We know that climate risks are growing while we wait. Which other sector has such profound understanding of risk management approaches and tools, and transformative potential than the financial sector? Using baseball terms, “the bases are loaded”. Who is ready to step up to the plate in Finland?
The blog is based on Mikko’s article ”Nukkuuko finassiala ilmastomuutoksen edessä?” published in Arvopaperi magazine 9/2016. Arvopaperi is a Finnish investment magazine.