Will the Banker Become a Climate Activist?

  • Johan HenningssonEmail author


Currently, banks lack proper understanding and incentives to manage climate-related financial risks and translate them into credit decisions. In this chapter, I will discuss how this scene gradually could change within the banking industry, mainly driven by regulators and rating agencies and potentially sudden market revaluations of climate-related risks. The chapter illustrates how banks, by using well-established methods, further developed by rating agencies could integrate climate factors into the credit decisions and become concerned consumers of corporate climate information. But the banking sector could face challenges in order to properly recognize and integrate climate-related risks in their risk management practices. Three such challenges are highlighted. Firstly, banks face practical difficulties when combining approaches to understand climate-related risks and translate them into quantitative measures of financial risks. Secondly, the current lack of relevant corporate climate information will create a challenge for banks to get relevant data for their models. Finally, a broader risk concept, which includes sustainability aspects could challenge traditional financial logics and create strong resistance on a psychological level. The chapter concludes that changes in banks’ day-to-day credit risk management and disclosure practices, as a response to regulatory demands to better include climate-related factors, could gradually change the risk concept, as perceived by the banking industry.


Green debt financing Sustainable finance Climate-related factors Banks 


  1. Basel Committee on Banking Supervision. (2015). Corporate governance principles for banks. Retrieved from
  2. Brookings. (2016). Links in the chain of sustainable finance. Accelerating private investments for the SDGs, including climate action (Global Views, No 5). Washington.Google Scholar
  3. Capital Requirements Directive IV, CRD/2013/36/EU.Google Scholar
  4. Caldecott, B., Tilbury, J., & Carey, C. (2014). Stranded assets and scenarios—Discussion paper (Stranded assets programme). Oxford.Google Scholar
  5. Carney, M. (2015). Breaking the tragedy of the horizon—Climate change and financial stability. Retrieved from
  6. Carney, M. (2016). Resolving the climate paradox. Retrieved from
  7. European Banking Authority. (2013). Guidelines on materiality, proprietary and confidentiality and on disclosure frequency under articles 432(1), 432(2) and 433 of regulation (EU) 575/2013.Google Scholar
  8. G20 Green Finance Study Group. (2017). G20 Green Finance Synthesis Report.Google Scholar
  9. Henningsson, J. (2009). Fund managers as cultured observers. Qualitative Research in Financial Markets, 1(1), 27–45.CrossRefGoogle Scholar
  10. High-Level Expert Group on Sustainable Finance. (2017). Financing a sustainable European economy (Interim report). Retrieved from
  11. High-Level Expert Group on Sustainable Finance. (2018). Financing a sustainable European economy (Final report). Retrieved from
  12. IFC. (2016). Climate investment opportunities in emerging markets. Washington.Google Scholar
  13. International Energy Agency (IEA). (2016). World energy outlook 2016. Paris.Google Scholar
  14. KPMG, GRI, UNEP, & CCGA. (2016). Carrots and sticks: Global trends in sustainability reporting regulation and policy. Retrieved from
  15. Moody’s. (2015). Environmental risks heat map shows wide variations in credit impact across sectors.Google Scholar
  16. Moody’s. (2017). Environmental, social and governance (ESG)—Global: Moody’s approach to assessing ESG in credit analysis.Google Scholar
  17. OECD. (2017). Investing in climate, investing in growth—A synthesis. Retrieved from
  18. SASB. (2016). SASB technical bulletin 2016–01—Climate risk (Working Draft). San Francisco.Google Scholar
  19. SOU. (2017:115). Att främja gröna obligationer. Stockholm: Norstedts Juridik AB.Google Scholar
  20. TCFD. (2017). Recommendations of the task force on climate-related financial disclosure. Retrieved from
  21. UNCTAD. (2014). World investment report 2014—Investing in the SDGs: An action plan.Google Scholar
  22. UNEP FI, & CDP. (2017). Portfolio investment in a carbon constrained world (The third annual report of the portfolio decarbonization coalition).Google Scholar
  23. UN Sustainable Development Goals. (2015). Retrieved from
  24. World Bank Group. (2015). Project PPI database. Retrieved from
  25. World Resources Institute, & UNEP Finance Initiative. (2015). Carbon asset risk: Discussion framework. Retrieved from

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Örebro University School of BusinessÖrebroSweden

Personalised recommendations