Climate risks as a source of credit risk

The words climate change evoke images of the damage caused by extreme weather events like floods, droughts, fires, and hurricanes. These events result in physical costs which are easy to observe and measure. Albeit these are not the only costs associated with climate change!

Some economies have already started their “green transition” process to mitigate climate related physical risks. This transition is driven mostly by public demand, but also increasingly by regulatory bodies. An example is the EU’s bold effort in making sustainability considerations an integral part of its financial policy, which in turn will significantly impact the capit...