Financial institutions must increasingly factor in the consequences of a changing climate and the transition to a carbon-neutral economy. DNB explores the impact of climate-related risks on the Dutch financial sector in its recent report, “Waterproof? An exploration of climate-related risks for the Dutch financial sector“. This impact can be felt increasingly strongly in a variety of areas, which is why DNB intends to embed climate-related risks more firmly in its supervision with the ultimate aim of ensuring sustainable financial stability.
The report addresses the consequences of climate change such as changes in the frequency of extreme weather and rising sea levels. Climate-related damage resulting from storms, hail and rain is usually insured in the Netherlands and hence has a direct impact on insurers. Large-scale flooding is often uninsured, but it can still have an impact on the assets of financial institutions through various indirect channels. The report also explores the consequences of the Paris climate agreement to limit CO2 emissions. This will create risks for the financial sector as a result of transition policy and technological developments. The market for green finance is also emerging, with its own opportunities and threats.