What is Climate Change?
Climate change is long-term shifts in temperatures and weather patterns.
What are the 5 causes of climate change?
Fossil fuels, Deforestation, Increasing livestock farming, Fertilizers containing, nitrogen, Fluorinated gases
So what’s climate change got to do with finance?
Climate change is one of the major risks threatening the well-being of mankind. It has increased the frequency and magnitude of extreme weather events causing loss of lives, diminished livelihoods, reduced crop and livestock production, and damaged infrastructure, among other adverse impacts.
Consequently, it is increasingly recognized as a source of financial risks for financial institutions and corporates. Globally, the central banking and regulatory community is demonstrating growing awareness of the issue and commitment to tackling the
challenge.
Therefore the Central Bank of Kenya came up with guidelines on Climate-Related Risk Management that provide a roadmap to entrench climate risk management in bank operations and business models for all banks in Kenya.
What are climate related risks?
- Physical risks
Those related to the physical impacts of climate change, such as extreme weather events, chronic heat waves, sea-level rise, erosion, and biodiversity loss.
Physical risks can be categorized as either acute or chronic in nature:
2. Transition risks
Transition risks are business-related risks that follow societal and economic shifts toward a low-carbon and more climate-friendly future. These risks can include policy and regulatory risks, technological risks, market risks, reputational risks, and legal risks. These arise from the process of adjusting towards a lower carbon economy.
What are some ways we can reduce and manage climate risk?
These include
- regulation
- research, development, and deployment of new technologies
- conservation
- efforts to increase public awareness
- positive incentives to encourage choices that lower emissions
- adding a price to greenhouse gas emissions, which creates incentives to reduce emissions broadly.
