The interaction between climate-related risks and market risk

As climate change rapidly evolves from a distant concern to an immediate challenge, it has become imperative for the financial sector to understand the interconnection between climate related risks and other financial risks. This focus on climate change has been highlighted by governments, industry groups, regulators, and public and private institutions, both locally and globally.

This article explains the interaction between climate-related risks and market risk in the South African financial services environment by defining each risk and suggesting how financial institutions can incorporate climate-related risks into their current market risk assessment and management systems.