Report outlines strategies for banks to tackle climate change adaptation and boost resilience
A new report, titled "Practical Guidance on Implementing Adaptation and Resilience for Banks," released by the United Nations Environment Programme Finance Initiative (UNEP FI), aims to help banking professionals integrate climate adaptation and resilience into their risk frameworks and business strategies.
The guidance is structured around the UN Principles for Responsible Banking Journey, with a focus on Strategy, Assessment, and Action. It provides a roadmap and resources to support bank action on climate adaptation and resilience.
Key Imperatives for Banks
The guidance outlines six key imperatives for banks: 1. Tailor adaptation strategies to local policy, market, and sector-specific needs. 2. Embed adaptation within core strategy elements such as governance, risk management, lending, and product development. 3. Innovate financial products and portfolios, including sustainability-linked loans and resilience-linked lending criteria. 4. Prioritize client engagement to assess adaptive capacity and support clients’ adaptation efforts. 5. Champion systemic resilience by co-financing resilient infrastructure and partnering publicly and privately to influence policy. 6. Progress iteratively by starting with practical steps and scaling up capabilities and data usage over time.
Integrating Climate Adaptation
By incorporating these elements, banks can reduce downside risk, create new business opportunities, build client trust, and contribute to systemic resilience—making adaptation finance not only a risk management tool but a competitive advantage.
The guidance provides methods such as a “physical climate risk equation” to evaluate hazard exposure, client vulnerability, and adaptive capacity under immediate and longer-term threats. It also emphasizes avoiding maladaptation through “Do No Significant Harm” financing principles.
Complementary Frameworks
Additional frameworks complementing this guidance include ISO 14090:2019 Adaptation Guidelines, which offer a structured six-step cycle for adaptation planning, thereby bridging adaptation with financial reporting standards and helping banks demonstrate resilience to regulators and investors.
Sector-Specific Examples
The report provides concrete illustrations and detailed scenarios from the real estate and agriculture & food sectors. However, banks operating in areas other than these sectors are encouraged to adapt the principles to their own unique portfolios and client needs.
The Future of Climate Adaptation in Banking
As global temperatures are expected to rise over the coming decade, leading to increased impacts from extreme weather events, floods, landslides, wildfires, droughts, and chronic climate impacts like rising sea levels, there is a growing demand for banks to develop strong climate adaptation and resilience (A&R) strategies and support A&R solutions across the real economy.
The new Principles for Responsible Banking (PRB) guidance has been launched, and banks can help their customers become more climate resilient by financing the technologies, products, and services that enable people, businesses, and nature to become more resilient. The guidance recommends ensuring the bank’s A&R approach remains effective through feedback loops and iterative refinements.
In conclusion, this guidance equips banking professionals to systematically integrate climate adaptation into their risk frameworks and strategies, reinforcing their ability to manage evolving climate risks and leverage opportunities in resilient finance.
- The new report, titled "Practical Guidance on Implementing Adaptation and Resilience for Banks," focused on climate-change and its impact on the banking industry, providing a roadmap to help integrate climate adaptation and resilience into risk frameworks and business strategies.
- The guidance outlines six key imperatives for banks emphasizing strategies tailored to local climate risks, embedding adaptation within core banking elements, developing innovative financial products, client engagement, systemic resilience, and iterative progress.
- By following these imperatives, banks can reduce risk, create business opportunities, build trust, and contribute to resilience, making climate adaptation finance a competitive advantage as well as a risk management tool.
- Additional frameworks like ISO 14090:2019 Adaptation Guidelines complement this guidance, offering a structured approach to adaptation planning and bridging adaptation with financial reporting standards.
