This October 2020 report from Ceres examines the impact of climate risk on loan portfolios of the largest U.S. banks. Over half the syndicated lending of major U.S. banks is exposed to climate transaction risk due to inadequate preparation for emissions reductions in line with the Paris Climate Agreement, the analysis shows. Banks may face substantial losses from this direct exposure. Incremental climate risk and the financial system’s interconnectivity could result in balance-sheet contagion. Detailed analysis, case studies and modelling are provided. Recommendations include actions to assess and disclose risk; improve measurement and decision-making tools and methods; and act to mitigate climate risk and its ultimate impact.
Key words: Market sizing, protocols/standards, research & development, market sizing, risk assessment