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The Impact of Climate Risks on the Insurance and Banking Industries

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Sustainability and Financial Risks

Part of the book series: Palgrave Studies in Impact Finance ((SIF))

Abstract

It is now largely recognised that the global climate has changed since the pre-industrial period. While the role of financial institutions in the transition to a low-carbon economy has received increasing attention over time, more limited has been the evidence on how climate change might affect financial institutions’ balance sheets. This chapter aims to redress this paucity of evidence by examining the impact of climate risks on the banking and insurance industries. To this purpose, it presents the main channels through which the physical, transition and liability risks of climate change might translate into financial risks for banks and insurance companies, along with the key data available to date. The extent to which climate risks might impair financial stability while causing new market failures is also discussed.

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Notes

  1. 1.

    Although the carbon bubble alone is unlikely to be a source of systemic risk (Weyzig et al. 2014), it could combine with other sources of financial instability and create important destabilising effects for the financial system.

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Author information

Authors and Affiliations

  1. Cambridge Judge Business School, Centre for Business Research, University of Cambridge, Cambridge, UK

    Giorgio Caselli

  2. Economic Policy and Performance Group, Cranfield School of Management, Cranfield University, Cranfield, UK

    Catarina Figueira

Authors
  1. Giorgio Caselli
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  2. Catarina Figueira
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Correspondence to Giorgio Caselli .

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Editors and Affiliations

  1. IAE Université Paris 1 Panthéon-Sorbonne (Sorbonne Business School), Paris, France

    Marco Migliorelli

  2. IAE Université Paris 1 Panthéon-Sorbonne (Sorbonne Business School), Paris, France

    Philippe Dessertine

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Caselli, G., Figueira, C. (2020). The Impact of Climate Risks on the Insurance and Banking Industries. In: Migliorelli, M., Dessertine, P. (eds) Sustainability and Financial Risks. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-54530-7_2

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  • DOI: https://doi.org/10.1007/978-3-030-54530-7_2

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