Climate-Related Financial Risks and Their Implications for Financial Stability: A New Challenge for South African Regulators

Matsietso Agnes Matasane ()
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Matsietso Agnes Matasane: University of Witwatersrand

A chapter in ESG Disclosures in the Southern African Development Community, 2025, pp 79-96 from Springer

Abstract: Abstract Globally, climate change is widely acknowledged as a paramount challenge, representing the most persistent Environmental, Social, and Governance (ESG) issue confronting contemporary society and the global economy. While traditionally perceived as an environmental or “green” challenge, recent perspectives recognize climate change as a multifaceted issue impacting economic and social development, with far-reaching consequences for health, labor, and productivity. Financial regulators, central banks, and regulatory authorities are increasingly recognizing their pivotal role in addressing climate change and its associated disasters, such as storms, tornadoes, and tsunamis, due to the potential destabilization of economies and the well-being of vulnerable populations. In the context of South Africa, the country is currently grappling with significant exposure to climate change, including electricity outages, temperature spikes, and water variability. These exposures introduce new and additional risks for all banks, which are not comprehensively addressed by existing performance standards or the Basel Committee on Banking Supervision (BCBS) Principles for the effective management and supervision of climate-related financial risks. Consequently, there is a compelling need for an enhanced focus on these risks. Through qualitative discourse analysis, this chapter argues that the absence of specific banking legislation or subordinate regulation mandating explicit requirements for banks to manage climate, environmental, and societal risks creates a regulatory gap. Additionally, the chapter posits that existing reporting frameworks for banks inadequately address the underlying climate-related financial risks arising from the activities of their clients. In light of these observations, the chapter concludes by proposing potential solutions to effectively address climate-related financial risks within the financial sector.

Keywords: Banks; Climate change; Climate-related financial risks; Economy; Financial institutions; Financial stability; Physical risks; Mitigation; Regulation; Transition risks (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:csrchp:978-3-031-96205-9_4

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DOI: 10.1007/978-3-031-96205-9_4

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