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Climate change and banks

Questions Boards should be asking

This report is relevant to Board members of European banks, in particular Non-Executive Directors (NEDs). It outlines the significant and complex challenges posed to banks by climate change, and sets out the key issues that Boards should consider in order to be able to provide robust challenge and effective oversight of the bank’s approach to the identification and management of climate risk.

The report provides examples of high-level considerations for Boards in relation to the bank’s strategy and business model, governance and culture, risk management, and scenario analysis. It also gives examples of challenge questions that Boards should ask in each of these areas. The ultimate goal is to help Boards drive long-term sustainable differentiation in the marketplace for their bank, meet stakeholder expectations, and manage climate change risks effectively.

Climate change is a key concern across all sectors of the economy. Financial services regulators worldwide are moving to ensure banks identify risk exposures from climate change, and establish strategies and adjust business models to manage them. Although the broad topics are familiar, the specific issues surrounding central banks and climate change are new. The questions explored in the report will help Boards navigate this difficult environment and meet regulators’ expectations.

About the Centre for Regulatory Strategy, EMEA

The Deloitte Centre for Regulatory Strategy is a powerful resource of information and insight, designed to assist financial institutions manage the complexity and convergence of rapidly increasing new regulation.

With regional hubs in the Americas, Asia Pacific and EMEA, the Centre combines the strength of Deloitte’s regional and international network of experienced risk, regulatory, and industry professionals – including a deep roster of former regulators, industry specialists, and business advisers – with a rich understanding of the impact of regulations on business models and strategy.

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