Introduction

Jing Zhang

Climate change is perhaps the most profound challenge our social, political and economic systems have ever faced. We are at an inflection point in how to deal with it. Key aspects of this challenge increasingly gaining attention are the risks and opportunities faced by the financial industry. On the one hand, climate change poses significant, emerging risks to financial institutions and financial stability. These risks are not well understood, measured or quantified, and financial institutions are trying to incorporate them effectively into their risk management practices. On the other hand, massive amounts of capital will be required to finance climate resilience and transition, creating significant demand for new financial products and services.

This book, comprised of four parts, serves as a practical and accessible reference for an essential understanding of climate-related risks and opportunities in financial institutions. The first part offers a broad context for the need to embrace sustainability in financial risk management, and explains how climate change manifests as a source of economic and financial risk. It lays the foundation for later chapters by describing