Rapid increase in Climate-related Regulations

As a consultant in the world of financial services, I believe that transition risks, and litigation risks for those institutions that fail to transition quickly enough, are the immediate threat – but it is not possible to rule out that a combination could lead to systemic risk that fundamentally changes the financial service industry. 

Indeed, we can already see a rapid increase in climate-related regulations – 96% of the sustainable finance and investment policies identified by the PRI have been developed since 2000 (PRI | Policy (unpri.org)). This will force the financial services to invest in monitoring and reporting their transition to net zero, but it also provides the early adopters with huge opportunities for growth and innovation. 

Such change can already be seen, from green banks that finance the transition to clean energy and simultaneously fight climate change, to green mortgages that incentivise homeowners to increase their EPC rating and therefore carbon footprint. As customers increasingly consider the green credentials of the cards they have in their wallet, there is a real force for change and a risk for the financial institutions who have not started the transition.

-Sarah Hammond, UK