Banks in emerging markets alive to business risks from climate change

18 Sep 2009

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Amid growing pressure on developing countries to join an international climate treaty later this year, a new Ceres report released shows that emerging market banks are beginning to integrate climate change considerations into lending and other business decision-making, but that significantly more attention is needed.

A network of investors, environmental groups and public interest organisations, Ceres direct the Investor Network on Climate Risk (INCR), comprising 80 institutional investors with collective assets totalling approximately $9 trillion. 

The report, commissioned by the German development finance institution DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbh - found strong evidence that most Asian, Latin American and other emerging market banks are aware of the wide-ranging business impacts from climate change, such as the growing physical risks from increased drought and flooding and the growing investment opportunities associated with renewable energy, energy efficiency and climate adaptation projects.

Despite these trends, the report shows that only a small number of banks are financing clean energy programs and fewer still are participating in carbon trading projects.

DEG, a member of KfW Bankengruppe (KfW banking group), finances investments of private companies in developing and transition countries. As one of Europe's largest development finance institutions, it promotes private business structures to contribute to sustainable economic growth and improved living conditions.

''More emerging market banks realise that climate change is a big business issue, but their responses so far are inconsistent and only scratch the surface of what is needed,'' said Mindy S. Lubber, president of Ceres, which published the report, Addressing Climate Risk: Financial Institutions in Emerging Markets. ''As key providers of capital in these developing countries, these banks must do more to steer their economies to safer, clean energy solutions and away from risky carbon-intensive investments that exacerbate climate change.''

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