Systematic analysis of banking sector response to climate change risks and opportunities

Posted: Nov 17, 2022

• Dr. Prof. Emma Peterson
• Dr. Prof. Ethan Nasser
• Dr. Prof. Harper Romano

Abstract

This research presents a comprehensive systematic analysis of how global banking institutions are responding to the complex challenges and opportunities presented by climate change. Unlike previous studies that have focused primarily on risk assessment or regulatory compliance, this investigation employs a novel multi-dimensional framework that integrates financial risk modeling, organizational behavior analysis, and strategic adaptation assessment. We developed and applied a Climate Banking Response Index (CBRI) that evaluates banks across four critical dimensions: risk management integration, opportunity capitalization, stakeholder engagement, and strategic alignment with climate objectives. Our methodology combines quantitative analysis of financial disclosures from 150 major banks across 35 countries with qualitative assessment of strategic initiatives and governance structures. The findings reveal significant disparities in banking sector preparedness, with European and Asian banks demonstrating more advanced climate integration strategies compared to their North American counterparts. Notably, we identify an emerging pattern where leading institutions are transforming climate challenges into competitive advantages through innovative financial products and services. The research contributes original insights into the banking sector's evolving role in the climate transition and provides a robust analytical framework for assessing institutional climate responsiveness. Our analysis demonstrates that while regulatory pressure remains a primary driver, market opportunities and reputational considerations are increasingly shaping banking strategies. This study establishes a new benchmark for evaluating financial sector climate responsiveness and offers practical guidance for institutions navigating the complex landscape of climate-related risks and opportunities.