Climate-related risk drivers increasingly contribute to financial risks. While US-based global systemically important banks (G-SIBs) are publicly scaling back their net zero commitments, they remain focused on managing climate risks and are developing new ways of identifying and assessing such risks. It is vital for investors, counterparties and policymakers to understand how these banks are doing so, even as the US policy environment moves away from dedicated supervision of climate risks.
This policy insight documents the publicly available disclosures of six US-based G-SIBs. The authors explore how these banks incorporate climate-related risk drivers into their risk management practices and business strategies.
Core insights
The disclosures of these banks suggest that:
- Their core risk management architectures, analytical tools and investment in climate-risk capabilities have remained broadly intact across consecutive disclosure cycles and, in some cases, become more sophisticated.
- These banks continue to embed climate risk drivers in mainstream enterprise risk management.
- There is a clear separation between the banks’ management of climate-related financial risks and their sustainability commitments.
- They disclose much more detail about how they assess climate risks than they do about the results of these assessments.
- They continue to invest in data, modelling, scenario analysis and specialised risk capabilities.
- The set of practices emerging at these large banks can help supervisors identify where climate-related risk management is becoming a normal component of enterprise risk management.
- If banks were to place a greater emphasis on decision-useful disclosure, this would help investors, counterparties and policymakers.
DOI: 10.21953/researchonline.lse.ac.uk.00140783