Banking Regulation for ESG Principles and Climate Risk

Rosaria Cerrone

A chapter in Banking and Accounting Issues from IntechOpen

Abstract: Nowadays banking activity is greatly influenced by environmental and social conditions. For this reason, regulators have been committed to defining Environment, Social, and Governance (ESG) principles. In addition, climate change has shown the relevance of climate risks that have relevant implications in the new risk management process. The 2030 Agenda for Sustainable Development is based on the 17 SDGs that are, in the next future, the main challenge for the worldwide economy as they will be the basis for real sustainable activities. In this context, banks play a very relevant role as they have the power to lead this new challenge and are able to facilitate businesses to run toward a sustainable green economy. For this reason, banks' activity is now oriented to increase and allocate credit and investment to more sustainable sectors. As climate risk is, at the same time, cause and effect for a socially responsible activity, regulators have been considering the role of banks for the green and ecological transition, which is necessary to face this new risk. The chapter is an overview of rules, regulations, and guidelines for banks referred to ESG principles and their adoption in a global perspective; it also refers to climate risk that, due to its components, may require further capital to preserve banks' stability.

Keywords: climate risk; climate change; ESG; environmental sustainability; sustainability risk; sustainable finance (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ito:pchaps:260026

DOI: 10.5772/intechopen.104110

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