THE rising frequency and severity of climate-related events such as extraordinary rainfall and subsequent flash floods is a good wake-up call for financial institutions (FIs) to recognise and manage climate-related risks effectively.
After all, climate change events and its corresponding risks and impacts are now ubiquitous – and is expected to stay for the long run. As a re-cap, the December 2021 flood resulted in a total loss of RM6.1 bil with more than 120,000 displaced from homes.
Therefore, it has become imperative for FIs to be more conscious of climate-related risks, its impact towards operations, and focusing on how they can help customers and the community build climate resilience, and transition towards a low carbon economy.
Moreover, the ability of FIs to manage risks as well as integrate climate change considerations into their business strategies and operations also help ensure a stable and sound financial system.
“The regulatory landscape on climate risk management has been evolving rapidly with the establishment of Task Force on Climate-related Financial Disclosures (TCFD) by the Financial Stability Board (FSB) in 2015 marking a key milestone,” observed Deloitte Malaysia Risk Advisory Leader Justin Ong.
“Subsequently, the Network for Greening the Financial System (NGFS) was formed with groups of central banks and supervisors, and since then we have seen various climate risk management and scenario analysis expectations develop globally across various.”
For the record, Deloitte Malaysia in collaboration with the United Nations Environment Programme Finance Initiative (UNEP FI) recently organised its inaugural Banking Climate Risk Engagement Series 2022.
This is a planned series of events focused on uplifting the capabilities of the Malaysian banking industry to advance preparations in anticipation of growing stakeholder expectations and regulatory requirements related to climate change. — April 13, 2022
