Climate change must be fought : What does PACTA say about the transition risks for banks?

Abstract

Climate change is one of the great issues of our time. The need to rapidly reduce carbon dioxide emissions will adversely impact the operations of many companies, and may make old operations unprofitable. This may give rise to credit loss risks for the banks that financed these companies. In Finland’s case, the problem is worst with regard to energy production. Loan portfolio risks can be assessed by combining company-specific information on technologies and emissions with corporate loan portfolio data. The loan portfolio transition risk for banks appears to be moderate.