A warming planet is about to revolutionise how banks define risk

The ECB instructs banks to consider their sensitivity to climate risk when weighing how much capital they need beyond minimum requirements

It’s increasingly likely that banks will face new capital requirements that will reflect how exposed their loan books are to climate change.
 
“That is the logical next step,” Janine Dow, a senior director for sustainable finance at Fitch Ratings, said in an interview. “Because once you size a problem, then you identify the risk. And as a regulator, you can’t just leave an emerging risk exposed.”
 
Such a requirement would mark a significant expansion of new rules that the financial industry, particularly in Europe, is now facing amid a race against time to prevent an environmental catastrophe. The