Assessing transition risks in banks’ corporate loan portfolios

Abstract

Climate change is forcing the economy to transit towards a more sustainable future. Transition risks are related to the process of adjustment to a low-carbon economy. Granular data are needed to analyse the transition risks. Transition risks have economy-wide impacts via business links, and a comprehensive picture requires going beyond firms’ own emissions. The transition towards net-zero will need large investments. Based on future investment needs, it is expected that there will be a material increase in the demand for bank loans and other financing.